This is a new, updated MIP6 Proposal for the addition of REINNO’s tokenized commercial real estate backed loans to MCD by REINNO.
1. Who is the interested party for this collateral application?
The asset originator is REINNO as is represented by Viktor Viktorov (@Viktor_REINNO, [email protected], Co-Founder and Chief Executive Officer), Hristo Piyankov (@Hristo_Piyankov, [email protected], Chief Data Officer) and Natalia Shirshova (@ natalia_reinno on Rocket.Chat, Co-Founder and Chief Marketing Officer).
2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.
REINNO is a financial technology company offering a new solution for lending and real estate tokenization with a focus on providing liquidity. Our services cover the technology, corporate structure, legal compliance and marketability of tokenized real estate assets. We are positioned to be the first company to accept tokenized real estate as loan collateral. Lending using tokenized real estate as collateral provides much higher flexibility, simplifies the application process and reduces costs for end customers.
REINNO is a turnkey solution for anyone who wants to tokenize real estate and who is matching our eligibility criteria. Through our offerings, property owners obtain new ways of both replacing their existing bank mortgage and borrowing against their equity in a property. Using digital tokens as loan collateral allows for greater liquidity and cheaper funding, benefiting the end customer. Also, by tokenizing their assets users can trade real estate in fractions. REINNO’s ultimate goal is to build a fintech ecosystem for tokenized real estate, which will provide the full spectrum of blockchain-based financial services for consumers worldwide.
REINNO is the company behind the very new Tokenized Instant Lending (TIL) concept for real estate. This new approach is possible because of the blockchain technology that underpins it and the rising security tokens popularity.
TIL is making real estate associated loans (mortgage, HELOC and home equity loans) efficient, fast, flexible and with no need to foreclose. Using tokenized real estate as collateral allows REINNO to tremendously improve the way these loans work today. REINNO combines the benefits that you could have from having a mortgage, a HELOC or a home equity loan and bundles them in one product adding even more benefits. Usually a mortgage blocks the entire property, making it hard for the owner to sell any equity from it. Even if they have already repaid $4,900,000 of a $5,000,000 mortgage, the entire asset is blocked by the bank.
However, by using tokens (fractional digital ownership) borrowers are able to take out an instant loan backed by a fraction of the real estate value. This way, only the tokens used as collateral get locked; the rest of the equity remains free and can be accessed for additional funding or sold as needed. Moreover, when a portion of principal is repaid, the borrower receives an equity equivalent back. The more principal is repaid, the more tokens are freed from the collateral. Furthermore, if two people are holding tokens that represent the same property, a loan taken by one person will not affect the tokens (or ownership) of the other in any way.
REINNO will bundle multiple tokens representing tokenized real estate into a single REINNO stablecoin, which in turn will be used as collateral for obtaining DAI.
Maker will be one of the capital sources used by REINNO. This will benefit both REINNO and Maker. Maker will know the average cost of capital set by traditional institutions (banks, insurance companies, investment funds) and have the opportunity to adjust its rates accordingly. This way Maker can never miss out on potential profit and always stay competitive. At the same time, REINNO will be able to grow the size of capital available for its lending services. It will also ensure stability and diversification. In case one source fails to provide capital, REINNO’s clients will not experience a service interruption. Moreover, these credit lines can provide liquidity to one another. If Maker investors want liquidity, REINNO can repay DAI before the loan maturity by refinancing it through another credit line or simply selling the loan.
REINNO tokenizations to date:
- US-based income-producing commercial real estate
- Total value tokenized : $355,137,266
- Completed deals: 8
- Deals in the pipeline: 13
Watch REINNO’s 2020 in review video.
3. Provide a brief history of the project.
The idea for REINNO was born in December 2018 when Viktor Viktorov, it’s CEO, was working on another project related to cryptocurrencies. He saw the potential that tokenization had in the real estate space and decided to start a new company. Since then, REINNO has reached many important milestones.
The company completed its first tokenization of a commercial real estate fund worth $105.5 mln in January 2020. It also created a unique legal and technical structure that allows REINNO to streamline the tokenization process. Since then, it tokenized a total of eight projects worth over $355 mln. All of them include income-producing properties located in the U.S., including residential, retail, healthcare and industrial real estate.
REINNO launched the demo version of its lending platform in August 2019. The company created a proprietary lending model that accounts for the risks associated with both real estate and digital tokens.
The company also built a marketplace where investors from all over the world can invest in tokenized real estate. With the recent amendments from SEC allowing investors with certain professional knowledge, experience or certification to qualify as accredited, even more people can participate in the offerings. The marketplace launched in September 2020 with five offerings. Since then, over $11 million has been secured through the platform.
Other achievements include winning Startup World Cup regionals (2020 edition; the finale was postponed due to the COVID-19 complications), appearing as experts in industry-specific publications and media (e.g. Cointelegraph, Decrypt, Security Token Market, Value.Tokenized), and building a strong team. REINNO brings together experts in commercial real estate, fintech, IT, law and business growth. It also has a global tea of sales people around the world - from the USA and UK to China and Russia.
4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
Examples of tokens issued by REINNO:
- This represents the process of taking a loan through app.reinno.io. The actions on the left side are performed by a user on the platform. The actions on the right side are performed (or automated) by REINNO in the backend. At the end when DAI is generated, REINNO sends it to the borrower’s wallet. From there, they can decide whether to use it directly or exchange it for USD.
We expect this to be the most popular scenario among our users.
- This represents a scenario when a user sends his CRE tokens directly to a smart contract and exchanges them for REINNO stablecoins (instead of REINNO doing it in the previous infographic). This allows them to stake REINNO stablecoins and borrow DAI directly from Maker, instead of going through REINNO’s front end. We expect only The most tech-savvy users (and DeFi enthusiasts) to interact with the system this way.
5. Link any available audits of the project. Both procedural and smart contract focused audits.
The stablecoin smart contract is currently awaiting audit.
6. Link to any active communities relating to your project.
7. How is the applying collateral type currently used?
For the time being, REINNO tokenizes individual commercial real estate locations and real estate portfolios, and issues their own individual security tokens which represent fractional ownership of the building or portfolio (and the underlying cash flows).
As part of the integration with Maker, REINNO will issue REINNO stablecoins to bundle multiple tokenized real estate assets. The stablecoin smart contract is ready and awaits auditing. The stablecoin will have a fixed price of one USD and it will essentially function the exact same way as multi-collateral DAI does. Subsequently, this token will be used as collateral in order to produce DAI. This will provide liquidity to the REINNO stablecoin in order to disburse loans to people who lock their CRE tokens in the REINNO protocol.
8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
We as Reinno Tokenization LLC or Reinno Property Management LLC, USA, Delaware
9. Where does exchange for the asset occur?
The REINNO stablecoin has not been deployed yet. It is not part of the original REINNO technology stack, but rather a derivative tool, specifically designed to provide liquidity for tokenized real estate. The security tokens produced by REINNO as a result of commercial real estate tokenization are available for sale on REINNO’s marketplace. Subsequently they will be traded on secondary markets - those of our partners (e.g. ADAX) and REINNO’s own (now in development).
After the REINNO stablecoin is created, it will be made available for trading on exchanges, such as Uniswap. There are two potential liquidation scenarios:
- Obtain REINNO stablecoins in exchange for DAI at an auction.
- Sell REINNO stablecoins on an exchange for an arbitrage opportunity.
- Obtain REINNO stablecoins in exchange for DAI at an auction.
- Obtain CRE tokens in liquidation in exchange for REINNO stablecoins.
- Sell the CRE tokens on REINNO’s secondary market (or any other market where it is listed) OR hold them and benefit from % of their cashflows.
10. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
11. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
Reg D filings (the link might be unavailable outside the U.S.)
12. (Optional) List any possible oracle data sources for the proposed Collateral type.
REINNO performs an independent assessment of each property which is subject to tokenization and subsequently loan disbursement. Furthermore, these properties will be reassessed on a regular basis. All the documents produced in the process will be made available to the appointed auditor.
An important data source is REINNO Oracle - an application that calculates the value of real estate behind the tokens. It provides an estimate of a property value based on its characteristics (e.g. year built, size, layout) and similar buildings in the neighborhood. This number is used to calculate the lending parameters. If the real asset has to be sold, the assessed value can be used to determine the minimum amount to be made on a sale.
REINNO uses the data from the Oracle as a base for its real estate index. The index categorizes properties based on their profile and risk factors, as well as current and future performance. It makes diversification and collateral portfolio management simple and efficient. For example, a freshly renovated (1) multifamily building (2) with good tenant history (3) in a fast-growing city (4) can be rated A. At the same time, an old (1) mall (2) with expired leases (3) in a city with growing unemployment (4) is likely to be rated E. A newly built (1) office building (2) with a good tenant mix - big and small companies from different industries - (3) in a convenient location (4) earns a C. Here we consider historic results, current situation and future projections. We expect this multifamily property to stay a strong performer and this mall to struggle. Despite its current success, this office building is still risky due to the pandemic and cannot get the highest rating. Of course, this is just a simplification of the index and more factors are taken into account.
REINNO believes that collateral diversification is important for risk mitigation. To make it possible, REINNO will adjust the interest rates for the property time that the company wants to have more or less in the collateral pool. For instance, if the value of loans backed by tokenized multifamily buildings reaches a certain level, REINNO will increase the interest rates for the future users borrowing against such properties. Alternatively, if REINNO wants to issue more loans backed by tokenized industrial facilities, the interest rates for this collateral type will decrease. REINNO will use the same logic for geographical diversification (more loans collateralized by tokenized real estate in Texas - higher rates; few loans originated with buildings in Florida - lower rates).
13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type
As mentioned earlier, having several capital sources will allow REINNO to liquidate or refinance loans. Moreover, they can be sold to third parties specializing in loan purchasing. REINNO loans are collateralized by a unique asset type and enable such companies to diversify their portfolios and expand their risk strategy.
REINNO aims to attract individual liquidators too. When a liquidation is triggered, they will purchase REINNO stablecoins at a discount and then exchange them in search for arbitrage opportunities. REINNO is working on incentives for liquidity providers. An example of such incentive is governance tokens. REINNO will create a governance token pool specifically for this purpose. Liquidity providers will then use these tokens for voting or increasing their profits by selling these tokens.