Commercial Real Estate

FFO = Net Income + (Depreciation Expense + Amortization Expense + Losses on Sale of Assets) – (Gains on Sale of Assets + Interest Income)

Automated execution of full loan servicing/administration lifecycle. Stablecoins for collecting mortgage payments, funding escrow accounts to pay property taxes and insurance premiums, and passing principal and interest on to the investor.

Corporate treasury: Instant transfers between internal business accounts can maximize investment of excess cash, free working capital and streamline reconciliation with data-rich ISO^® 20022 messaging.
Corporate payroll: Transferring funds between internal accounts at an organization or between an organization and its payroll processor can enable faster funding, negate the need to prefund payroll accounts and eliminate reliance on less efficient payment options, such as checks.
Vendor payments: Using instant payments to pay suppliers for inventory or services can benefit businesses by improving cash flow management, enhancing operational efficiency and optimizing liquidity management.
Real estate transactions: Immediate clearing and settlement of high-dollar commercial real estate payments, such as escrow account funding and contractor payments, can provide certainty of funds, allow after-hour and weekend payments, and improve transparency during the process.

PROBLEM

Checks take days to process and can get lost in the mail.

Cash payments require in-person drop-offs, which are inconvenient.

Money orders cost tenants extra fees and require a trip to buy one.

Mortgages Life Cycle

Origination
Processing
Underwriting
Closing
Warehousing
Delivery
Secondary market
Loan servicing

MORTGAGE LIFE CYCLE

ORIGINATION The lender helps the borrowers complete the loan application.
PROCESSING The lender documents the loan file.
UNDERWRITING The lender evaluates the loan file.
CLOSING The borrowers sign loan documents; the sellers transfer the title.
WAREHOUSING The lender may temporarily warehouse closed loans.
DELIVERY The lender packages and sends the loan to an investor
SECONDARY MARKET Lenders and investors buy and sell mortgages.
LOAN SERVICING Third parties collect the borrowers’ monthly mortgage payment.

Real Estate Cash management

COUNTERPARTIES

Owner
Renter
Renter bank
Owner bank

FLOW OF FUNDS

Renter sends USD.
Owner receives USD.
Owner pays utilities.
Owner pays repairs/vendors.
Owner pays insurance.
Owner pays property taxes.
Owner pays mortgage.
Owner pays management fees.

COUNTERPARTIES

Borrowers Lenders

Servicing means receiving any scheduled periodic payments from a borrower pursuant to the terms of any federally related mortgage loan, including amounts for escrow accounts under section 10 of RESPA (12 U.S.C. 2609), and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract. In the case of a home equity conversion mortgage or reverse mortgage as referenced in this section, servicing includes making payments to the borrower.

Settlement service means any service provided in connection with a prospective or actual settlement, including, but not limited to, any one or more of the following:

(1) Origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of such loans);

(2) Rendering of services by a mortgage broker (including counseling, taking of applications, obtaining verifications and appraisals, and other loan processing and origination services, and communicating with the borrower and lender);

(3) Provision of any services related to the origination, processing or funding of a federally related mortgage loan;

(4) Provision of title services, including title searches, title examinations, abstract preparation, insurability determinations, and the issuance of title commitments and title insurance policies;

(5) Rendering of services by an attorney;

(6) Preparation of documents, including notarization, delivery, and recordation;

(7) Rendering of credit reports and appraisals;

(8) Rendering of inspections, including inspections required by applicable law or any inspections required by the sales contract or mortgage documents prior to transfer of title;

(9) Conducting of settlement by a settlement agent and any related services;

(10) Provision of services involving mortgage insurance;

(11) Provision of services involving hazard, flood, or other casualty insurance or homeowner's warranties;

(12) Provision of services involving mortgage life, disability, or similar insurance designed to pay a mortgage loan upon disability or death of a borrower, but only if such insurance is required by the lender as a condition of the loan;

(13) Provision of services involving real property taxes or any other assessments or charges on the real property;

(14) Rendering of services by a real estate agent or real estate broker; and

(15) Provision of any other services for which a settlement service provider requires a borrower or seller to pay.

RE TXN COUNTERPARTIES

Real estate broker.
Real estate agent.
Seller.
Buyer.
Mortgage lender.
Home inspector.
Title search company or lawyer.

Why stablecoins for CRE payments?

Enhance convenience of tenant collections with ‘always-on’ instant payments
Reduce concerns about delays and additional costs with transparent timing of funds
Accelerate disbursements with immediate availability of funds
Automated periodic (recurring) monthly cash distributions to investors
Lump sum large value cash distribution to investors

Stablecoin CRE use cases

Development and Construction

Real Estate Financing

Property Sales

Property Leasing and Management

Drawdown on construction loans

Mortgage loan origination and associated fees

Earnest money deposit and cash to close from buyer

Rent payments

Supplier payments

Mortgage loan payoff

Payout of seller proceeds

Property owner or investor payments

Earned wage access for subcontractors

Home equity loans and reverse mortgage payments

Other payments made at closing such as title insurance premiums, real estate commissions, attorney, inspector and appraisal fees, and home warranty policy premiums, among others

Tenant collections like utilities

Taxes

Asset sale

Tax Implication

Opportunities for Deferred Capital Gains

Any capital gains realized from the sale are subject to capital gains tax.

Through a 1031 Exchange, investors can defer capital gains taxes by reinvesting the proceeds from the sale into a "like-kind" property within a specified time frame.

The tax rate depends on various factors, including the holding period of the property and the investor's income tax bracket.

This allows investors to defer paying taxes on the capital gains until a later date when they eventually sell the replacement property.

‍refinancing

Tax Implication

Opportunities for Deferred Capital Gains

Refinancing generally does not trigger taxable events, as it involves restructuring debt rather than selling the property. However, investors should be aware of potential tax implications related to cash-out refinancing, such as recaptured depreciation or passive loss limitations.

Refinancing does not provide direct deferral of capital gains taxes since it does not involve the sale of the property.

Fannie Mae MBS