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4. REIT COMPARED TO REIDAO
Real Estate Investment DAO (REIDAO) is a new term to accurately reflect the pioneering operations of Bricklayer.
The real estate element of the DAO acts like a traditional Real Estate Investment Trust (REIT) in its acquisition of assets and distribution of income. However, it is important to recognize that shareholders in REITs have a limited impact on contributing to traditional centralized strategy and little to no oversight on any investment decisions discussed in corporate boardrooms.
A REIDAO is structured around a set of smart contracts on the Ethereum blockchain. Its governance model is designed to be community-driven, with decisions made through a transparent and decentralized voting process. It incorporates a variety of blockchain applications to modernize RE transaction processes and benefits from a VA fund to fuel portfolio expansion without the need to rely on subsequent funding rounds.
The first REIT was launched back in 1960 by the National Association of Real Estate Investment Trusts (NAREIT). This investment vehicle generates competitive, tax efficient returns based on consistent dividend income and long-term capital appreciation. In addition, their low correlation with other assets renders them an effective portfolio diversifier that may help decrease overall portfolio risk and boost returns.
The drawbacks of using traditional REITs for investment include high administrative costs, significant front-end fees of 9-10% and risk of redemption suspensions due to over leveraged debt to equity (D/E) ratios. Bricklayer firmly advocates reducing fees, lowering the D/E ratio, mitigating exposure to interest rate hikes, and promoting higher levels of operational transparency and liquidity.
*Total fees based on $100M acquisition at a return of 10% with a 6% hurdle rate then sold for $120M assuming a 1-year hold.
The REIDAO has a two-tiered governance structure, consisting of the Bricklayer Commercial Real Estate (BCRE) and the Bricklayer Community. The BCRE entity is made up of a group of founding APs who have made significant contributions to the development and growth of the DAO. The BCRE team is responsible for overseeing member management as well as proposing new initiatives and changes to the DAO’s manifesto.
BCRE retains 10% of the net-uplift in capital value from successful real estate disposals, both tokenized and untokenized SPVs, as an allowance to cover the real estate management fees, marketing costs, operational costs and facilitate decentralized management and expansion initiatives. The remainder of the allowance is required to incentivize APs.
To qualify for corporate tax relief on distributed earnings, REITs must payout at least 90% of their net earnings to shareholders by way of dividends. Due to the UAE jurisdiction, Bricklayer is not subject to corporation tax on Layer 1 investments however, to futureproof the platform for subsequent international acquisition layers, this ‘REIDAO’ is designed to outperform RIETs and distribute 100% of net income in the form of quarterly dividends and maintain a minimum 75% Treasury weighting in both tokenized and untokenized Real Estate assets.