Operating Expenses
Overview
Running a tokenized real estate protocol requires sophisticated infrastructure, professional management, and ongoing operational support. Manifest maintains complete transparency about these costs, which are funded through the protocol's structural advantage: the yield spread between HEI portfolio returns (~15%) and home price appreciation (~3–5%).
Unlike traditional investment products that charge management fees directly, Manifest's operating expenses are paid from excess yield generated by the portfolio. This means $USH holders receive full exposure to U.S. home price appreciation without any fee deductions, while the protocol sustains itself through superior portfolio performance.
The Economics of Expense Capture
Manifest's fee capture mechanism leverages the fundamental difference between HEI returns and home price appreciation (HPA):
Daily Process:
Portfolio Performance: HEIs generate ~15% annual returns due to contractual 2x equity multipliers which deliver investor returns above HPA
NAV Growth: $USH NAV increases at ~3–5% annually, tracking home prices
Excess Value Creation: The ~10-12% spread represents real economic value
Token Minting: Additional $USH is minted proportional to excess performance
Allocation: Newly minted $USH funds operations and rewards stakers
This elegant design ensures operational sustainability without compromising the core value proposition. $USH holders always receive their full home price appreciation, regardless of operational costs or staking rewards. The protocol essentially captures the "alpha" generated by HEIs' structural advantages and uses it to fund the ecosystem and staking rewards.
See NAV and Minting for detailed mechanics of how this daily process works.
Investment-Related Costs
HEI Origination and Servicing
The complexity of originating and managing HEI contracts requires specialized expertise. Manifest partners with established HEI originators who handle:
Origination (4% one-time fee):
Homeowner sourcing and qualification
Property valuation and underwriting
Legal documentation and recording
Lien perfection and title work
Ongoing Servicing (2% annually):
Payment processing and settlement management
Property tax and insurance monitoring
Default management and workouts
Regulatory compliance and reporting
Homeowner communications
These partners have originated billions in HEIs and maintain the operational infrastructure that would be prohibitively expensive for Manifest to replicate. The partnership model allows Manifest to access institutional-quality assets while focusing on protocol development and liquidity provisioning.
Working Capital
Maintaining sufficient liquidity is paramount for a protocol backing liquid tokens with illiquid assets. Manifest targets 20% of Total Value Locked (TVL) as working capital, held in:
$USDC for immediate liquidity needs
Short-term lending protocols via rehypothecation
This conservative liquidity buffer ensures the protocol can handle significant redemption pressure without forced asset sales. Manifest will also seek to deploy these liquidity assets into higher earning assets to minimize cash drag.
Operational Infrastructure
Technology and Valuation Services (Villcaso Corporation)
Villcaso Corporation serves as Manifest's technology and operations provider, delivering critical infrastructure at cost-plus 5%:
Smart Contract Infrastructure:
Smart contract development and maintenance
Staking and reward distribution systems
Governance implementation and voting mechanisms
Security monitoring and incident response
Valuation and Analytics:
Daily NAV calculation
Individual HEI performance tracking
Portfolio analytics and risk monitoring
Regulatory reporting and compliance data
User-Facing Technology:
Web application for token purchases and portfolio monitoring
API infrastructure for institutional integrations
Real-time dashboards showing portfolio composition and performance
Documentation and developer resources
Villcaso's role as the "Labs company" ensures tight integration between protocol design and technical implementation. The cost-plus model aligns incentives while maintaining operational efficiency.
Entity Management and Compliance
Manifest's multi-jurisdictional structure requires professional management with associated costs:
Direction and Management:
Professional director services: $20,000 annually
Ensures governance integrity and regulatory compliance
Manages the overall protocol direction
Entity Maintenance:
Annual tax filings and compliance: ~$20,000+
Registered agent services across jurisdictions
Corporate secretary and record-keeping
Regulatory filings and updates
Legal and Regulatory:
Ongoing legal counsel for protocol operations
Regulatory monitoring across jurisdictions
New product/feature legal review
Dispute resolution (if needed)
This professional management ensures Manifest operates within legal frameworks while maintaining the flexibility to evolve with the regulatory landscape.
Third-Party Professional Services
Additional specialized services support protocol operations:
Audit Services: Annual audits when required by growth or regulation
Tax Advisory: International tax planning and optimization
Specialized Legal Advice: Securities, real estate, and blockchain expertise
Trustee Services: Delaware statutory trust administration
These services scale with protocol growth, ensuring professional standards as assets under management expand.
Expense Scaling Dynamics
Operating expenses demonstrate favorable scaling characteristics:
Fixed vs. Variable Costs:
Fixed: Entity management, base technology infrastructure (~$200k annually)
Semi-variable: Professional services, enhanced technology
Variable: HEI servicing, origination fees (scale with AUM)
Scaling Benefits:
At $50M TVL: Fixed costs = 0.4% annually
At $500M TVL: Fixed costs = 0.04% annually
At $5B TVL: Fixed costs = 0.004% annually
This scaling effect means that as Manifest grows, a larger percentage of excess yield flows to stakers rather than overhead, creating a virtuous cycle of growth and efficiency.
Governance and Future Fee Structures
Manifest launches with zero fees charged directly to $USH holders. However, $USA governance token holders possess the right to permit $USH to be minted for additional purposes. In the future, this could include a fee paid to the $USA holders.
This optionality provides future flexibility while demonstrating that the protocol can operate successfully through portfolio performance alone. Learn more about the protocol fee model.
Cost Management Philosophy
Manifest's approach to cost management reflects institutional discipline adapted for DeFi:
Partnership Over Building: Rather than creating proprietary HEI origination systems, Manifest partners with established players who have invested millions in infrastructure. This approach accelerates time to market while accessing best-in-class capabilities.
Automation Where Possible: Smart contracts handle reward distributions, NAV updates, and rebalancing automatically. Human intervention is minimized to essential functions: portfolio strategy, partner management, and governance facilitation.
Transparent Reporting: All major expense categories are disclosed, with regular updates on cost optimization initiatives. Token holders can verify that operational expenses remain within stated ranges through on-chain data and portfolio reports.
Competitive Sourcing: Multiple providers for key services ensure competitive pricing. As the protocol scales, Manifest can negotiate better terms or switch providers while maintaining service quality.
Last updated