Detroit renters are feeling trapped with nowhere to turn after ongoing problems at various buildings remain unanswered. The buildings are run by a cryptocurrency real estate venture.
RealT, a Florida-based company, claims on its website that it’s “revolutionizing investment through tokenization, making real estate and other tangible assets accessible to everyone.”
It’s been selling chunks of rental properties it owns in Detroit to thousands of foreign investors, leaving some tenants stranded in run-down homes.
RealT’s novel approach to the business of real estate has come at a price, according to recent reporting by Outlier Media. In Detroit, where the company claims to own about 1,200 housing units spread over 800 properties purchased since 2019, hundreds of them have reportedly fallen into disrepair.
More recently, RealT also has gained a foothold in the markets of Chicago, St. Louis, and Cleveland, OH.
Meanwhile, RealT’s tenants in Motor City have complained of not being offered leases, and being unable to contact a property management company to request urgent repairs, such as for mold on the walls or an overflowing toilet. Others have been threatened with eviction, despite paying rent on time.
Still, others don’t even know whom to pay rent to, as they are unfamiliar with RealT and the scores of its nameless token holders from around the world identified only as numbers and letters on a blockchain.
What is real estate tokenization?
RealT operates an online marketplace that sells so-called “fractional ownership” of the properties the firm owns to investors.
A typical property has hundreds of “owners,” each holding on to a piece of its value in the form of a cryptocurrency token—a string of random symbols that shields sensitive data—and receiving dividends from rent paid by tenants.
All an investor needs to own a piece of property is a minimum of $50 and a virtual wallet to hold the tokens, which can then be swiftly offloaded to someone else.
On the other side of the real estate tokenization business, RealT would contract management companies to oversee the properties day to day.
And here’s apparently where the problems begin.
Shirquera Ayers, a mother of two living in a rent-subsidized home on Detroit’s east side, told Outlier that she’s been trying to make contact with the property management company hired by RealT, but without success.
Meanwhile, the family is unable to use their shower because the knobs are broken, and there is black mold growing on the walls as a result of a toilet that overflowed.
“I’ve been complaining for years, but nobody has ever come out,” Ayers told the outlet. “As far as I can tell, they’re slumlords.”
The tenant said she is continuing to pay rent because she is not in a position to move her family elsewhere.
Ayers is not alone. Other tenants claimed to have been contending with broken air-conditioner units, faulty garbage disposals, and malfunctioning bathroom vents, yet the company managing the properties allegedly did nothing.
RealT founders address complaints
The co-founders of RealT, brothers Jean-Marc and Remy Jacobson, have laid the blame for the mounting problems at the feet of former property managers, claiming that one of them swindled them out of money set aside for repairs and tax bills. Litigation in that case is said to be pending.
And the hurdles for RealT don’t end there, as data cited by the Michigan outlet suggests that the company’s real estate division, which operates under the name Michigan Realtoken and other similar monikers, owes the city of Detroit at least $2 million in unpaid taxes and 1,000 blight tickets.
On top of that, some 200 of its properties could be foreclosed over unpaid debt in the coming months.
The Jacobsons have defended their record in Detroit, insisting that they are committed to correcting past mistakes and paying all the back taxes, because they are interested not only in turning a profit, but also in bringing positive change to the community.
Most of RealT’s properties in Detroit are located in underpriced neighborhoods, and a segment of its tenants receive subsidized rent or tax credits.
New property manager promises change
According to Outlier’s reporting, Michigan Realtoken has recently started its own property management company, New Detroit PM LLC, and took over overseeing its rental homes and apartments, but allegedly failed to notify some of the tenants, who were left not knowing to whom they should be paying rent every month.
Then in mid-January, residents were sent red eviction notices warning them they would be ejected from their homes if they fail to pay rent—even after Jean-Marc said that won’t happen.
“If they’re well-meaning and they want to pay and work with us, we’ll work out a payment plan. We’ll make an agreement,” the RealT co-founder told Outlier.
In an email to Realtor.com®, spokesman Glenn Oswald, vice president at the PR firm Marx Layne & Company, said that “New Detroit is committed to the resolution of issues it has uncovered in its portfolio that were unbeknownst to management prior to early Fall 2024.”
Asked to confirm whether New Detroit PM is owned by Michigan Realtoken, which is part of RealT, Oswald replied, without elaborating further: “No, the real estate acquisitions companies have separate ownership from the technology company, RealToken.”
Oswald went on to say that the new management company has an advanced online portal for entering and updating tenant contact information, making payments, submitting maintenance requests, and checking the progress of maintenance requests. Tenants also can call or email the company, or visit one of its two in-person locations in Detroit.
Addressing the issue of tenants not having leases, the spokesman insisted that New Detroit PM has been working “tirelessly” to identify leases that were not turned over in the transition from the old management company to the new, and to renew them.
“Those that show a history of timely rental payments will not be penalized for the absence of a lease due to no fault of their own,” Oswald said.
The spokesman added that the tenants had been sent letters of handover from the old management company to the new one back in December, but he lamented that the process has been “extremely difficult.”
“The eviction notices were sent after the welcome letter, and our ground crew went door to door on multiple occasions at various hours and left another notice of our contact information,” Oswald explained. “In some instances, they reported hearing the TV on and seeing the car in the parking lot, but the door would not be opened. Nor did we receive follow-up calls as requested on our contact information.”
Oswald insisted that it was only after all efforts to contact the tenants failed that it was suggested “that an eviction notice would prompt the residents to call the office,” he said.
According to the spokesman, as of this week, all tenants who contacted the property management company, or who attended a recent community meeting, have been working with New Detroit to update their leases.
