Why the History of REITs Shows Us the Future of Real Estate Fractionalization
From Broyhill's Pioneering REITs to Smartblocks' Digital Revolution: The Unstoppable Evolution of Democratizing Real Estate
The year is 1960, and the United States is in the midst of a post-war economic boom. Real estate is the talk of the town, but it's a playground reserved for the wealthy elite. Enter Thomas J. Broyhill, a man with a vision and the audacity to challenge the status quo.
The Genesis
Before diving into the world of REITs, Broyhill was a savvy businessman with a knack for identifying market gaps. He was also the cousin of U.S. Congressman Joel Broyhill, who was pushing for new legislation to democratize real estate investment. When President Eisenhower signed the Cigar Excise Tax Extension of 1960 into law, Thomas saw an opportunity that was too good to pass up.
The Cigar Excise Tax Extension of 1960 was the legislative vehicle that also included the creation of Real Estate Investment Trusts (REITs). The law itself was not directly related to cigars or taxes but was a broader legislative package. It's a common practice in U.S. politics to include multiple, sometimes unrelated, provisions in a single bill.
Thomas J. Broyhill saw an opportunity because the law allowed for the creation of REITs, which were designed to enable all types of investors to invest in large-scale, diversified portfolios of income-producing real estate. Before this law, such investment opportunities were mostly available only to wealthy individuals or institutional investors. The new law democratized access to real estate investment, opening up a whole new market.
So, when the law was passed, it wasn't the cigar tax that caught Broyhill's eye; it was the revolutionary change in how real estate investment could be structured and accessed by the average American. This was the game-changing opportunity he seized upon.
The Experiment
So, Thomas J. Broyhill decided to launch not one, but three different types of real estate investment models:
Property Moguls - Targeted at high-net-worth individuals looking for exclusive real estate deals.
Community Builders - Aimed at middle-income families wanting to invest in their neighborhoods.
American Realty Trust - A broad, untargeted real estate investment fund.
Thomas was skeptical about all three. Property Moguls was too niche, Community Builders was too localized, and American Realty Trust was too broad and undefined.
The Pivot
But Thomas had an epiphany. The real estate market was dominated by big players with no soul—corporate giants that were all about numbers and had no connection with the average American. He envisioned a more democratic, more authentic way for people to invest in real estate.
So, he doubled down on American Realty Trust. He rebranded it, focusing on the "American" aspect to appeal to the patriotic spirit and "Realty Trust" to emphasize its investment nature.
The Guerrilla Marketing
Thomas knew he had to be disruptive. He started by targeting young, ambitious investors who were overlooked by traditional real estate firms. He sponsored local real estate seminars, got his REIT featured in emerging financial magazines, and even partnered with universities to offer "Real Estate 101" courses.
But what really caught people's attention were the billboards. Thomas put up billboards not just along highways but also in Wall Street, right in the heart of the financial world. The message was clear: "Invest in America, Invest in American Realty Trust."
The Tipping Point
The buzz was palpable. Financial analysts started discussing American Realty Trust on TV shows, and soon enough, the REIT became synonymous with smart, accessible real estate investing. Thomas had successfully disrupted an industry that had been stagnant for years.
The Legacy
A few years down the line, Thomas J. Broyhill was offered a buyout deal that he couldn't refuse. But his impact was already indelible. He didn't just create the first REIT; he revolutionized the way people thought about real estate investment.
The Future: The Smartblocks Exchange Era
Thomas J. Broyhill was a visionary who saw an opportunity where others saw barriers. He took a failing concept and turned it into an industry that today is worth hundreds of billions of dollars globally. He didn't just make history; he shaped the future.
Now, fast forward to today, and we're witnessing another seismic shift in the real estate landscape. Companies like Smartblocks are taking the democratization of real estate to the next level by fractionalizing properties. Imagine this: If Thomas J. Broyhill was the Gutenberg of real estate, introducing the printing press that made information accessible, then Smartblocks and other companies are the Internet—breaking down the last barriers and making real estate investment as easy as clicking a button.
Just as Broyhill democratized real estate for the masses, Smartblocks is doing the same but in a digital, borderless world. The essence remains the same: empowering everyday people to invest in real estate, but the methods have evolved to meet the demands of a new generation.
And that, my friends, is not just the epitome of success; it's the epitome of evolution.