Prestio Uniting DeFi and Real-World Assets Through Commercial Real Estate

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Prestio

6 min readAug 15, 2022

Prestio is an alternative financing solution for commercial real estate owners that is governed by Presta holders. Commercial real estate is to be understood as property specifically used for business or income-generating purposes.

Prestio unbanks commercial real estate finance. We at Prestio form a bridge between real-world assets and DeFi (decentralised finance). Bringing real-world commercial assets on-chain with our Asset Warehousing (AW) solution allows for collateralised lending to address the liquidity shortage present in the commercial real estate market.

Prestio joins global DeFi lending communities and the real world using real estate as the entry point.

Introduce the problem

Commercial real estate faces a liquidity crisis. Not only is the industry typically highly debt leveraged but the worth of commercial assets is more vulnerable to local and global economic factors than other segments of real estate. The COVID-19 pandemic exposed the gravity of the situation acting as a catalyst for a problem that has long plagued the industry.

This liquidity crisis has been driven primarily by two factors: a lack of government fiscal stimulus and the modus operandi of commercial banking. Asset-rich enterprises have little access to capital to service operating costs which eventually leads to default.

Commercial banking has denied liquidity to provide for general real estate health, instead favouring new developments or acquisitions lending to enterprises with large capital reserves entrenching a monopolised model. This modus operandi of favouring construction financing for a few enterprises has led to huge short-term liquidity pressure for commercial real estate owners. Working capital reserves have been depleted and commercial banks focus on restructuring existing loans instead of extending capital. This has led to an expected rise in defaults brought on by commercial banking policies, which has led commercial banks to double down on said policies in a vicious cycle leading to further defaults.

Prestio leverages DeFi, a global market of capital, to address this liquidity crisis whilst opening the door to a monopolised market that has hitherto been closed to the ordinary investor.

This monopolised market is a typical outcome of financial services dominated by centralised institutions. With the development of DeFi, the first viable alternative financial system, it is now possible to implement community-driven solutions. Prestio directs liquidity from providers to borrowers in dire need whilst introducing greater stability and security to DeFi lending, expanding DeFi’s value proposition, and thereby driving adoption.

Current Solutions

Currently, the only viable alternative to commercial lending is private marking lending, but this comes with its own slew of problems. To begin with, interest rates are far higher than commercial bank rates, often 100% higher, and there are always additional fees. The risk is also far higher with limited sometimes no options for loan extension or loan restructuring. Private lenders often stipulate an ownership transfer of the asset to collateralise the loan which can invalidate commercial agreements. Despite these factors due to the lack of commercial banking support the practice of private financing thrives in commercial real estate.

Prestio builds a financing solution designed to help asset owners not penalise them.

Prestio’s Approach

Prestio is designed to provide commercial real estate owners with a fairer and more equitable financing option giving them the choice to unbank themselves. Prestio delivers a truly decentralised alternative to TradFi (traditional finance) financing and for that reason is governed solely by the community- Presta token holders.

The Prestio DAO utilises two governance mechanisms:

The Operational DAO- Exists for on-chain governance. It will be responsible for appointing advisory boards which will be charged with logistics operations. The first advisory board will be the Real Estate Vetting Advisory Board (REVAB) responsible for vetting assets against pre-determined conditions. As Prestio develops more advisory boards will be appointed as needed.

The Prestio Foundation DAO- for off-chain governance, it exists as the legal entity behind Prestio that will be responsible for bringing assets on-chain, developing credit facilities, and issuing both Presta governance tokens and pUSD stable liquidity tokens. The Prestio Foundation DAO is domiciled in Switzerland due to its strong rule of law, and The Distributed ledger Technology Act 2021 (DLT). The DLT makes it easy to tokenize securities, allows them to be transferred, and gives real estate NFT security tokens a solid legal foundation.

Prestio performs five central functions: asset warehousing, lending, borrowing, yield farming, and compound interest.

Asset Warehousing (AW)

Prestio through its Asset Warehousing solution brings real-world assets on-chain. Real estate owners can collateralise their assets following a valuation process and then a loan contract is minted as an NFT security token, deposited in Prestio’s vault as collateral and borrowing is enabled. Collateralisation levels are 200%-400% of the assets’ fair market value. Included within the NFT security token are the third-party valuations, title insurance, and liability assessments, all these are hashed, thus immutable and auditable by all.

Lending

Users will deposit stablecoin into the liquidity vault which will be swapped at a 1:1 ratio into pUSD. This liquidity is utilised by asset owners who have collateralised their assets. Owners of pUSD can then partake in yield farming and prize pools on Prestio. They can reclaim their capital value when the loan matures along with interest payments. Prestio will be creating a 3-pool farm plus pUSD on Curve Finance to ensure deep market liquidity and enable investors to easily move in and out of providing liquidity.

Asset owners are borrowing directly from the DeFi community eliminating the middleman. The introduction of real-world assets to lending protocols not only introduces a layer of security which will allow the market size to grow and expand as more value is brought on-chain but increases DeFi’s value proposition and this added utility will drive value and greater adoption.

Borrowing

Real estate owners who have collateralized their assets and deposited the loan contract (NFT Security Token) in the Prestio vault can access liquidity in line with the determined collateralization level.

DeFi lending has been one of the largest areas of growth within DeFi however it is heavily reliant on crypto collateralization and thus highly susceptible to market fluctuations. A market swing can lead to a liquidation event and large fluctuations in the underlying asset’s value have led to mass-scale liquidation events. Prestio introduces stability and security to DeFi lending. Real estate assets offer a secure store of value and thus are well suited to be collateralized, and for the lenders introduce predictable and dependable yield returns.

Yield Farming & Compound Interest

Investors can utilise pUSD tokens to earn on Prestio whilst awaiting the loan’s maturation and partake in yield farming. When the loan matures the liquidity providers can reclaim their capital investment as well as the interest payments. Prestio features ‘Interest Reserves’ which are smart contracts that act as a profit share mechanism for liquidity providers. The interest payments for the loan are secured upfront from the loan principal and then used to generate additional revenue in stablecoin yield farming for investors, earning compound interest for Prestio lenders.

Conclusion

Prestio brings real-world assets to DeFi to introduce a level of stability and security much needed to allow the DeFi lending markets to expand reducing liquidation risks for borrowers and introducing more stable and dependable returns for lenders. Enhancing DeFi’s value proposition and thus driving market adoption by blending the digital and physical world.

Prestio offers a community driven solution to a monopolised market segment worth $10 trillion. Allowing ordinary investors access to commercial real estate markets whilst providing a much-needed alternative financing solution for asset owners. Prestio is the coalescence of a deep knowledge of DeFi, legal and regulatory frameworks, and the real estate market.

Built with transparency at its core, Prestio directs liquidity from a rapidly growing market segment, to where it is needed, enmeshing two discreet market segments. Built to support asset owners, increase the utility of DeFi, and allow unbanked real estate financing.