No, it is not the ‘blip’ event like in the movie ‘Avengers’ that made our Part 3 to disappear. We thought you should digest Part 1 and Part 2 before reaching Part 3. Have your coffee while reading.
Let’s recap the previous parts. This will help you to get back into the flow. We looked at real estate, real estate developers, the problems they face especially in financing their projects and that they can also approach LandOrc for it as an alternate financing. We call it LorcFinancing.
LorcFinancing is backed by existing real estate assets as collateral. It works like this. A real estate developer needs funding for his project. He has got a land to use as collateral. They can approach LorcFinancing, collateralise the land, for a relatively lower borrowing rate and start working on their projects. This is subject to clearance from voting process via Land Governance tokens (“LGOV”). Governance Tokens? What in the universe is that? Well, we will get into that soon. For now, the basic idea is, developer with collateral approaches LorcFinancing for funds. LorcFinancing, offers an opportunity to raise liquidity through the crypto ecosystem and lend it to the developers holding their collateral.
One would ask, how is LandOrc going to verify these collateral lands and the developers. Upon clearance obtained for LorcFinancing and its corresponding LandNFT being issued (NFT? We will come to this too), the participating real estate developer will have to provide a land collateral at an overcollateralization ratio of two-times (2x) over the aggregate financing amount. The asset collateral will be pledged to a local special purpose vehicle (SPV) that is affiliated with LandOrc. The overcollateralization ratio of 2x is to ensure sufficient liquidity cover in the event of a force-sale situation.
The purpose of the affiliated SPV is to disburse fiat currencies to the real estate owner and/or property developer and be the legal entity that holds the pledged collateralized assets under LorcFinancing. The SPV shall be operating within the same legal jurisdiction with the real estate owners and/or property developers to ensure operational efficiency (i.e., compliance with local authorities and on-the-ground communication point). Where will the SPV get the fiat currency from?
LORC tokens will be issued to the SPV and those tokens will have to be converted to fiat currencies in order to provide liquidity to property developers. The conversion to fiat is done in the same jurisdiction with the existing Digital Asset legal framework (Digital Asset Hub) and the prevailing fiat value is then transferred to the respective property developers as foreign direct investment (FDI) or short-term business loan via this SPV. Yeay! Developers can proceed with their projects.
Under LorcFinancing smart contract, the real estate owner and/or property developer will be obligated to pay
(i) the contractual periodic interest payments to the affiliated SPV in local currency (fiat); and
(ii) repayment of principal LorcFinancing amount in local currency (fiat) to the SPV (estimated within a maximum period of 2 years)
Upon maturity of the financing period, the affiliated SPV will process the loan repayment remittance of the equivalent fiat to the Digital Asset Hub. At the Digital Asset Hub, all fiat remittance will be converted into LORC of the equivalent value based on prevailing rates at the exchanges. This converted LORC would then be returned back to the respective Digital Asset owners’ wallets in accordance to their staking smart contracts as part of fulfilling contract obligation.
Hope the explanation on the initial process is clear. See the flow below.
Collateral (documents) pledged with local SPV.
Land NFT issued.
Voting (LGOV) for approval (other legal processes and validation of collateral documents would have preceded).
SPV converts LORC to fiat currency and transfers to Property Developers.
Developers proceed with the project.
Developers pay periodic interest and repayment of principal (2 years max) in fiat.
Fiat converted back to LORC.
Stake holders get back LORC according to smart contract agreement.
What are we missing here now?
Yes. All the technological terms. LandNFT (Land NFT tokens), LGOV (Land governance tokens), LORC (LandOrc tokens), smart contract and digital assets.
Too much for the moment? Stay tuned for Part 4.