The Parvis Secondary Market is the first of its kind in Canada.
Real estate investments have long been considered a cornerstone of wealth creation and portfolio diversification. However, one inherent challenge in private real estate investing has been the limited liquidity.
At Parvis, we believe that the solution lies in creating a secondary market for real estate, which parallels the concept of stock market trading beyond the initial public offering (IPO) stage. Just as investors can trade stocks on exchanges long after an IPO, the secondary market for real estate provides a platform where pre-owned properties or equity positions can be bought and sold, offering increased liquidity and flexibility to investors.
We’re excited to announce that we have launched the Parvis Secondary Market, the first of its kind in Canada.
In this article, we’ll provide details on:
- Secondary Markets in the context of real estate
- Why they typically trade at a discount
- How the Parvis Secondary Market is changing secondary market operations
- How it works
Secondary markets in real estate
In the context of real estate, a secondary market allows new investors to buy and sell a stake of an active real estate project or development– even if they didn’t invest when the offer was initially issued.
Traditionally, secondary markets in real estate are either entirely unavailable, or are not ideal for investors trying to sell positions. Redemption requests can be complicated and expensive, both for investors and developers.
Unlike conventional investments, private real estate assets are typically illiquid and require longer hold periods. In some cases, there is no opportunity to sell before the project end date. Additionally, there has historically been far less transparency in private than public markets.
Why secondary market positions sell at a discount
When private secondary market opportunities exist, they often trade at a significant discount. This is because pricing opacity during hold periods increases risk.
Private secondary markets operate differently from public markets in that:
- There are less frequent disclosures by private companies
- Sellers tend to have access to more information, such as actual financials
- Low trading volumes remove the ability for open-market price discovery
Without transparent, easily accessible, and up-to-date information, valuating the assets and liabilities of a company or performance of a real estate opportunity is much more difficult. Buyers have had to accept the risk associated with this pricing opacity, and market makers therefore price the assets at a discount to make them more attractive.
As a result, there has been a growing desire for private secondary markets in real estate that offer better liquidity and transparency.
Introducing the Parvis Secondary Market
We created the Parvis Secondary Market to address gaps in private real estate secondary markets, with a focus on:
- Enabling liquidity
- Providing transparency with transactions
- Providing more ways to diversify your investment portfolio
Investors will have the ability to efficiently resell their tokenized real estate assets with simple and seamless online transactions using blockchain technology and smart contracts.
How it Works
The Parvis secondary market acts as a bulletin board. All approved investors on the Parvis platform are able to participate in our Secondary Market. Investors are able to liquidate positions, and purchase other investors’ positions. An investor does not need to have invested in a project before they can invest in the secondary market.
- The Parvis Secondary Market allows you to trade your private real estate investments during semi-annual events that occur in the spring and fall.
- Each Secondary Market event will last for a 4-week period, consisting of a 2-week seller window and a 2-week buyer window.
- Sellers will be able to post sell orders with their initial ask price during the first 2 weeks of the event.
- Buyers will have a 2 week window to evaluate available investments, negotiate share prices and reach an agreement with the sellers.
- Once an agreement is reached, the buyer will put in an official offer and both parties will sign a Transfer of Ownership Agreement. At this time the buyer will need to fund their purchase within 5 business days.
- When payment for the purchase is made, Parvis will release the shares to the buyer and disburse the proceeds (net of fees) to the seller.
- Upon closing of the sale, Parvis will send the buyer’s proceeds (net of fees and charges) to the bank account we have on file. We will seek to facilitate closing and settlement as reasonably early as possible, but we generally expect to distribute sale proceeds within two weeks of the buyer window closing.
The Parvis Secondary Market ushers in a new era of real estate investing in Canada, addressing the challenges of liquidity and transparency traditionally associated with private real estate secondary markets. It’s currently in beta with more features to be added as we widen access to all investors on the platform.