When tokenisation is connected to property, the first question is not technical. The first question is: who owns what?

A commercial property may sit within a company structure where several legal and economic levels need to be kept separate. The property is an asset. The company that owns the property is a legal person. The owner of the company normally owns shares in the company, not the property directly. An external investor may also receive exposure through shares, a claim, a contract or another defined instrument.

If these levels are mixed together, property tokenisation can appear simpler than it is. A token may represent a defined position, but it does not automatically replace the company, the contracts, the financing or the legally relevant registers.

In this chapter, we therefore distinguish between three types of statement. Some matters are established, for example that a property and a limited company are different legal levels. Other questions depend on the actual structure, for example whether the investor holds shares, a claim or a contract-based economic right. Some questions around new tokenised arrangements may also be insufficiently tested and need to be treated as open legal questions, not as settled answers.

The property and the company are not the same thing

A property and a company are two different things. Under current Swedish law, there are established property-law and register-based arrangements for real property, where title registration and the property register are central. A digital token does not in itself change those arrangements or determine who is recorded as the registered owner.

The property is the underlying asset. It may consist of land, buildings, leases, operations, maintenance, technical condition and other circumstances that affect value. The property may have a market value, a cash flow and a risk profile.

The company is the legal person that can own the property. A limited company may also have assets and obligations other than the property itself.

A property company may, for example, have:

  • the property as an asset
  • cash
  • bank loans
  • leases
  • supplier contracts
  • claims
  • tax liabilities or other debts
  • rights and obligations under contracts

This means that ownership of shares in a company is not exactly the same as direct ownership of the company's property. The shareholder owns the shares. The company, in turn, owns its assets and is responsible for its debts.

The distinction may sound technical, but it is decisive. It affects what the investor is entitled to, what happens on a sale, how value is calculated and what a digital representation can actually refer to.

A common company structure around a property

A common structure may be that a property group owns a separate company which in turn owns a specific property.

In simplified form, it may look like this:

  1. Property Group AB
  2. owns 100 per cent of the shares in Property 1 AB
  3. Property 1 AB owns the commercial property

This is not the only possible model, and not all Swedish commercial properties are organised in exactly the same way. But separate property companies or SPV structures are often used to create clarity around a specific asset or portfolio.

Such structures may be used for:

  • separation of assets and liabilities
  • financing
  • administration
  • clearer accounting and financial monitoring
  • sale of a company rather than restructuring of an entire group
  • ring-fencing of risk between different projects or properties

The point of this chapter is not to say that one particular company structure is always best. The point is that the reader needs to see the levels. If Property Group AB owns the shares in Property 1 AB, and Property 1 AB owns the property, those are different ownerships at different levels.

What does the parent company own?

If Property Group AB owns 100 per cent of Property 1 AB, the parent company owns the shares in Property 1 AB.

Property 1 AB owns the property itself.

That is an important distinction. The parent company's asset is the shares in the subsidiary. The subsidiary's asset is the property. The value of the parent company's shares in the subsidiary is affected by the value of the property, but that is not the same as the parent company directly owning every physical part of the property.

It can be simplified like this:

  • the property is the subsidiary's asset
  • the shares in the subsidiary are the parent company's asset
  • the value of the shares is affected by the property's value, debt and other circumstances in the subsidiary

This is central to tokenisation. If a digital representation is linked to the parent company's shares, the subsidiary's shares, a claim against the subsidiary or another economic right, the result is different. It is not enough to say that "the property is tokenised" without specifying which level is actually meant.

Where does the investor enter?

An external investor can be connected to a property structure in several ways.

The investor may, for example, receive:

  • shares in the property-owning company
  • shares in another SPV above or beside the property company
  • a claim or debt instrument
  • a contract-based right to certain cash flows
  • an instrument that provides economic exposure to the property's value development
  • another legally defined position

That is why the phrase "investment in a property" can mean several different things. In everyday language it may sound as if the investor is buying part of the building itself. In legal and economic terms, the investment may instead relate to shares, debt, a contract or another position.

Chapter 4 goes deeper into shares, claims and other models. Here it is enough to understand that the investor's right must be defined before it can be represented digitally.

The legal assessment depends on how the structure is actually designed. A token in itself does not decide whether the investor has shares, a claim, a contract-based right or something else. The current right, contract, company structure, transfer rules and investor rights must be analysed before the model can be described correctly.

It is not enough to ask what percentage of the property is tokenised. The decisive question is which legal and economic right the investor actually receives.

An example: a property worth SEK 100 million

Assume that Property Group AB owns 100 per cent of Property 1 AB. Property 1 AB owns a commercial property with an illustrative market value of SEK 100 million.

The owner wants to raise capital economically corresponding to SEK 20 million.

It may be tempting to say that "20 per cent of the property is tokenised". But that is not precise enough. Before anything can be represented digitally, several questions need to be answered:

  • are 20 per cent of the shares in Property 1 AB sold?
  • is a claim issued or transferred?
  • is a contract-based economic right created?
  • does the investor receive voting rights?
  • is the investor entitled to cash flow?
  • is there a right to part of the sale proceeds on exit?
  • how is the investor affected by existing or new debt?
  • what exactly does the token represent?

The answers to these questions determine which position the investor receives. Two models may both provide economic exposure to the same property while being completely different legally.

If the investor receives shares in Property 1 AB, the question is what proportion of the company the shares represent and what rights attach to those shares. If the investor instead receives a claim, the question is which payment terms, security and priority apply. If the investor receives a contract-based right to certain income, the contract must explain how the right is calculated and when it applies.

Twenty per cent economic exposure is therefore not automatically the same as 20 per cent direct ownership of the property.

Property value is not the same as share value

Another common confusion concerns value. The market value of the property and the value of the company's equity are not the same thing.

Assume that the property has an illustrative market value of SEK 100 million. Property 1 AB also has bank debt of SEK 60 million.

In a very simplified model, this may mean:

  • property value: SEK 100 million
  • debt: SEK 60 million
  • simplified equity before other adjustments: SEK 40 million

An investor cannot therefore automatically take 20 per cent times SEK 100 million and call that the value of 20 per cent of the company. The company may have debt, cash, tax, claims, transaction costs, contractual obligations and other items that affect value.

This is a bridge to the valuation questions in Chapter 5. There, the distinction between property value, capital structure and NAV becomes more central. Here the main point is simpler: the value of the economic right depends on which level and which instrument it refers to.

If the token represents shares, debt or another economic position, the valuation analysis must follow that position. It is not enough simply to look at the gross value of the property.

Two completely different sales

It is also important to distinguish between two types of transaction.

The first is that Property 1 AB sells the property. In that case, the company transfers the underlying property to a new buyer. After such a transaction, the company may hold cash or other assets instead of the property, depending on how the transaction is carried out.

The second is that Property Group AB sells shares in Property 1 AB. In that case, Property 1 AB can continue to own the property while ownership of the company changes.

There is therefore a difference between:

  • sale of the property
  • sale of the shares in the property company

Both transactions can affect investors, but in different ways. An investor who holds shares is not affected in the same way as an investor who holds a claim. An investor who has a contract-based right to cash flow needs to understand what the contract says about sale, refinancing, repayment and termination.

This is why tokenisation cannot be described as a shortcut around the legal structure. The digital representation must follow the transaction and the right that actually exist.

Four information layers to keep synchronised

A robust model for tokenised property needs to keep several information layers synchronised.

A simplified way to describe this is:

  1. the property and relevant property information
  2. the company, share ownership and the company's registers
  3. contracts, financing and investor rights
  4. digital representation and token register

A blockchain can record the digital representation. It can show holdings, transfers or certain events. But it does not automatically become the legally authoritative source for every fact about property ownership, company ownership, contractual rights, debt or other circumstances outside the digital environment.

If company documentation, the share register, loan agreements, investor agreements or other supporting material say something different from the digital system, the model needs a clear process for reconciliation and correction.

Which source is authoritative depends on which fact is being tested. Property-related information, company-law information, contractual terms and digital holding records may have different functions and different legal significance. This leads on to Chapter 6 on documentation, sources and verification. For tokenisation of real-world assets to work over time, the system must know which sources govern, how they are checked and how changes are entered into the digital representation.

OPEN LEGAL QUESTION
Existing property law, company law, contract law and securities law remain relevant when a position is represented digitally. It is established that the token alone does not decide who owns the property or which right the investor has. At the same time, some new structures may be insufficiently tested in guidance, case law or supervision, especially if the token combines several rights, transfer rules or investor functions. The question is then how that specific construction should be classified, not whether existing law ceases to apply.

Who owns what?

A simple comparison can summarise the structure:

  • Property 1 AB

Owns the property.

  • Property Group AB

Owns the shares in Property 1 AB.

  • The investor

Owns or holds the right that the chosen investment model actually provides.

  • The token

Represents the defined digital position.

This comparison shows why precision matters. The token should not create an unclear shortcut between the levels. It should make the defined position clearer, more administrable and easier to follow.

Summary

Property tokenisation becomes understandable only when the legal and economic levels are separated.

Five principles are particularly important:

  1. The property and the company that owns it are two different legal levels.
  2. Share ownership is not automatically direct ownership of the company's property.
  3. The investor's rights depend on which instrument or contract is actually used.
  4. Property value and the value of the company's equity are not the same thing.
  5. The token should represent the defined position, not create an unclear shortcut around the legal structure.

In the next chapter, the Swedish learning path continues with the types of models that can be used: shares, claims and other economic instruments. English translations of the additional chapters are being prepared.

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