If you’re not a renter in Detroit, you might not have heard about RealT, a startup that allows crypto bros to buy up blockchain-based ownership shares of rental properties in downtrodden cities.
The scheme works on a fractional ownership model, in which each property is split into “tokens” to be organized like cryptocurrency on the blockchain. Last year, stories of the deplorable conditions of these rentals began circulating courtesy of Outlier Media, which found that leaky roofs, black mold, and busted air conditioners were common conditions at RealT properties.
Now, the chickens seem to be coming home to roost. According to new reporting by Outlier, the Florida-based RealT has stopped nearly all weekly payouts to token holders — the platform’s crypto investors — as its Michigan division, New Detroit, faces tax forfeiture of over 300 Detroit properties. That, it seems, is due to millions of dollars it owes the city in unpaid taxes, water fees, and over 1,000 blight citations.
“The model no longer works,” read an email from RealT to investors obtained by Outlier. On top of emergency repairs and property management staff, RealT is struggling to cover even the most basic operating costs, grinding daily functions to a halt. As a result, the company’s collection of derelict buildings has gone from rough to downright dangerous.
In a statement to the Detroit-based publication, RealT attorney Andrew Creal blamed the city for the collapse.
“Due to the City’s actions, including but not limited to, barring evictions and the direct collection of rent for nearly eight months at the outset of the lawsuit, we had to trim the staff,” he said. “This was by no means our goal when New Detroit was created, but the City’s actions left us no choice.”
A sprawling investigation by Wired reveals how RealT’s breakdown translates to real life conditions for tenants, who have to deal with flooded basements, collapsed ceilings, and broken windows. Though traded at bargain-bin prices, their homes are still tokenized somewhere on the blockchain.
“Honestly, I probably shouldn’t live here, but I’m trying to find somewhere else,” a woman named Maya told Wired. She lives at a RealT property in the Detroit suburb of Redford, where a huge, leaking hole in the ceiling reveals the rafters holding her roof up. “This place is literally a slum.”
As civil counsel for Detroit Conrad Mallett told Wired, city inspectors have “found thousands of violations” across RealT’s Motown properties. “We concluded, in most cases, people were living in substandard housing.”
That has resulted in a sprawling nuisance abatement lawsuit against the company, putting a dent in RealT’s ability to sell off parts of its portfolio to recoup costs. By the time that trial, scheduled for May 27, comes to order, RealT may no longer be solvent — a contingency Detroit housing authorities are planning for.
“The city has a workable plan that would be able to effectuate the repairs needed to these properties,” a spokesperson told Outlier, “whether or not RealT continues to exist.”
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