Tag Archives: Real Estate Finance

Digitalized Tokenized Real Estate Part 2

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Why Digitalize? 

  • Automatesdocument retrieval and data entry.
  • Trusted Data improves asset values and liquidity.
  • Deliver current pricing and performance data at greater speed, lower cost, and more frequency.
  • Dramatically reduce cost and friction of asset valuations and due diligence time.
  • Eliminate duplication of efforts to value and audit assets.

Data is stored in one trusted database automatically (as authorized) providing information to investors, lenders, service providers such as accountants, and third-party valuators who can provide updated opinions of value (optional).

Why Tokenize?

  • Management – tokens are electronic versions of documents combined with smart contracts to define and automate an offering and associated workflow. The smart contract defines what happens upon the occurrence of an event. For example, the digitalization component reports share sales and distribution. The smart contract transfers ownership of the shares, calculates and makes the distribution, updates the capital table, and stores the information on an auditable, unalterable blockchain with all information available via a secure online portal.
  • Flexibility – smart contracts allow for complex structures. Cash flows can be allocated in various configurations: to senior lenders, to mezzanine, to preferred equity, to general partners and limited partners – with automatic, instantaneous waterfall calculations and capital account adjustments. Actions dictated by the smart contracts embedded in the token could also be non-financial, for example management of timeshare units or club memberships.
  • Liquidity – Currently real estate is an illiquid asset, localized, with high due diligence and transactional costs – especially on the trading of limited interests. Digitalization provides the necessary information and Tokenization opens the investment to the world as a tradeable instrument – in conformance with SEC and other legal regulation.

 The sponsor could stop here with a cost and operationally efficient investor relations platform or continue to a listing on an Alternative Trading System to raise capital and allow the investors to actively trade a previously illiquid asset.

Benefits of Digitalization + Tokenization + Alternative Trading Systems:

  • Fractionalization – smaller investment amounts accessing more investors.
  • Globalization – cross-border real estate finance is complicated and requires significant investment in understanding local law and practices – security tokens regulation is handled by the issuer and the tokens can be listed on multiple markets or sold to investors outside of the listing market (subject to legal requirements) thus opening investments to any investor with internet access.
  • Ease of Information – due diligence/investment information is available online.
  • Ease of Investment – investors trade tokens similar to trading stocks & bonds.
  • Institutional Trading – institutional trading desks accept lower yields/higher prices in return for easy access to reliable due diligence information and the ability to trade electronically on a regulated market.

Rising seas could wipe out $1 trillion worth of U.S. homes and businesses | Grist

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Some 2.4 million American homes and businesses worth more than $1 trillion are at risk of “chronic inundation” by the end of the century, according to a report out Monday. That’s about 15 percent of all U.S. coastal real estate, or roughly as much built infrastructure as Houston and Los Angeles combined.

The sweeping new study from the Union of Concerned Scientists is the most comprehensive analysis of the risks posed by sea level rise to the United States coastal economy. Taken in context with the lack of action to match the scale of the problem, it describes a country plowing headlong into a flood-driven financial crisis of enormous scale.

 

Check out interactive map to see how your home, zip code or community does: http://US Coastal Property at Risk from Rising Seas.

Union of Concerned Scientists report at: Underwater: Rising Seas, Chronic Floods, and the Implications for US Coastal Real Estate (2018)

Grist: Rising seas could wipe out $1 trillion worth of U.S. homes and businesses

NYC Real Estate | NYC Luxury Market | 432 Park Ave

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It took two months longer on average to sell a New York City luxury apartment in 2016 compared with 2015. That’s according to the real-estate agency Olshan Realty, which on Wednesday published its year-end report on the New York residential market.

It backed up other reports released earlier in 2016 that showed the luxury market in Manhattan, New York’s most expensive borough, had a tough year. Unlike other price segments of the housing market, there’s an excess of luxury apartments, giving buyers power to negotiate asking prices lower.

“New York City’s rental market has been mostly steady, except at the high end, where the inventory has risen and rents have drifted down,” the Federal Reserve said in a recent Beige Book based on comments from its contacts.

Source: NYC Real Estate | NYC Luxury Market | 432 Park Ave

The “New Housing Crisis” – Not Enough Rental Homes? | Zero Hedge

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The point here is that while the housing market has recovered – the media should be asking ‘Is that all the recovery there is?’

With 30-year mortgage rates below 4%, we should be in the middle of the next housing bubble with prices and home ownership rising. The question the media should be asking is “why?” Furthermore, what happens if the “bond market bears” get their wish and rates rise?

The housing recovery is ultimately a story of the “real” unemployment situation that still shows that roughly a quarter of the home buying cohort are unemployed and living at home with their parents. The remaining members of the home buying, household formation, contingent are employed but at lower ends of the pay scale and are choosing to rent due to budgetary considerations. This explains why household formation is near its lowest levels on record despite the “housing recovery” fairytale whispered softly in the media.

Housing-NetHouseholdFormation-072516

While the “official” unemployment rate suggests that the U.S. is near full employment, the roughly 94 million individuals sitting outside the labor force would likely disagree. Furthermore, considering that those individuals make up 45% of the 16-54 aged members of the workforce, it is no wonder that they are being pushed to rent due to budgetary considerations and an inability to qualify for a mortgage.

The risk to the housing recovery story remains in the Fed’s ability to continue to keep interest rates suppressed. It is important to remember that individuals “buy payments” rather than houses, so each tick higher in mortgage rates reduces someone’s ability to meet the monthly mortgage payment. With wages remaining suppressed, and a large number of individuals not working or on Federal subsidies, the pool of potential buyers remains contained.

The real crisis is NOT a lack of homes for people to buy, just a lack of enough homes for people to rent. Which says more about the “real economy” than just about anything else.

While there are many hopes pinned on the housing recovery as a “driver” of economic growth in 2013, 2014, 2015, 2016 – the lack of recovery in the home ownership data suggests otherwise.

Source: The “New Housing Crisis” – Not Enough Rental Homes? | Zero Hedge

Why Commercial Real Estate Is Next: ‘Challenging Technicals’ Are About To Become ‘Weak Fundamentals’ | Zero Hedge

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There is a growing sense of tighter financial conditions, particularly to the commercial real estate sector. Late last year the regulators issued a joint statement on Prudent Risk Management for Commercial Real Estate Lending and the latest Senior Loan Officer Opinion Survey (SLOOS) shows that banks tightened their lending standards to commercial real estate meaningfully in 4Q15…. The growing sense of gathering clouds in terms of tightening financial conditions to commercial real estate translates into a more challenging road ahead for US commercial real estate.

Source: Why Commercial Real Estate Is Next: ‘Challenging Technicals’ Are About To Become ‘Weak Fundamentals’ | Zero Hedge