Portfolio Valuation
How Manifest values the HEI portfolio backing $USH
Overview
Manifest employs two complementary valuation methods to assess the HEI portfolio: Net Present Value (NPV) and Accrued Value. The protocol uses the minimum of these two values for each HEI when calculating total portfolio value, ensuring conservative valuation that protects token holders.
This portfolio valuation serves multiple purposes:
Determines total backing value for $USH
Calculates daily excess returns for token minting
Sets expectations for Reserve Pool reconciliation
The Two Valuation Methods
Net Present Value (NPV)
The discounted cash flow of projected HEI contract cash flows.
Accrued Value
The estimated value based on earned appreciation and gradual ownership transfer.
Conservative Valuation
By taking the minimum of these values, Manifest conservatively estimates HEI value below what assets could typically sell for in securitizations.
Net Present Value (NPV)
Individual HEI assets have payoff profiles like "bullet bonds" — a large payment delivered at a future date. Unlike traditional bonds, the timing and magnitude of future payments aren't fixed. NPV captures the economic value of these uncertain cash flows.
NPV Calculation Components
1. Settlement Projections Using conditional prepayment rates (CPRs) based on Morningstar DBRS HEI securitization methodology:
Probability of settlement each given month during the HEIs term based on assumed CPR
Multiply probability by estimated intrinsic value during that month
Creates projected cash flow schedule from potential settlements
2. Default Projections Using conditional default rates (CDRs) from Morningstar DBRS:
Assets with defaults recovered at 70% of intrinsic value
Default cash flows also estimated and included
3. Servicing Cost Cost of remaining in the portfolio:
Each month, servicing costs are paid to maintain the HEI
Discounting All projected cash flows from the HEI are discounted at the U.S. Federal Reserve's Effective Federal Funds Rate (EFFR) to create an estimate NPV for the given HEI.
Provides stable discount rate
Approximates "on-chain risk-free rate" from T-bill backed stablecoins
Accrued Value
Accrued Value measures HEI value based on estimated appreciation while owned by Manifest.
First Year
During the first year of an HEI's term, Manifest estimates its value as growing from the price Manifest purchases the HEI for from the originator to the intrinsic value of the HEI (i.e., what the homeowner would need to pay at settlement).
After the First Year
After the first year, Manifest shifts to a model combining two sources of value accrual:
Component 1: Value of the Owned Asset
The purchase price paid for the HEI and corresponding property proportion.
Changes in value match home price appreciation (HPA) on asset as if effective cost cap where not constraining ownership.
Example: HEI contract is for 20% of $1M property
If HPA is 3% in during a given year, Component 1 value accrued is $6K (3% * $200K)
Component 2: Bonus Earned Over Time
On any HEI, there is a bonus amount paid to the investor for taking a long duration risk on the asset. The difference between maximum potential ownership and initial investment amount is this bonus ownership. Manifest recognizes this bonus as accrueing gradually over time.
Approximately 1/84 per month (1/7 per year)
Example: $100K in bonus ownership × 1/7 = $14K recognized in a given year
Combined Accrued Value Example
Example growth for $100K HEI:
Component 1: $6K from HPA
Component 2: $14K from bonus earned over time
Total Accrued Value: $20K
Total Portfolio Value
Daily calculation sums all HEIs using minimum(NPV, Accrued Value), providing the conservative portfolio valuation used for:
Determining collateralization ratios
Calculating excess returns for minting
Setting settlement reconciliation expectations
Why This Conservative Approach Matters
Using the minimum of NPV and Accrued Value ensures:
Early years: Accrued Value typically lower as ownership transfer builds
Later years: NPV often lower due to discounting effects
Throughout: Conservative buffer protects token holders in a liquidation
This approach means HEI values are typically below prices that would be recognized in the event of a portfolio securitization, providing additional safety margin while generating sustainable returns for distribution.
Property Price Estimation
HEI asset valuation estimate are based on underlying home value estimates. Manifest uses third party valuation models to estimate current and future home values and appreciation.
Valuation Method - Rolling HPA Forecast
Manifest starts all home valuations at the initial home valuation used when the HEI was originated. Manifest then each month creates a 3-year home appreciation rate forecast based on the then current estimate for the subject property's value and the 36 month forecast for that same property. The initial home valuation is subsequently adjusted daily by a rate based on the projected 3-year price appreciation. Each month, when new current value estimates and 36 mount forecasts are available, new daily price appreciation rates are calculated.
This approach was created to:
Link valuation estimates to the valuation estimate used during origination.
Eliminate seasonality in valuation estimates (e.g., home prices are higher in the spring than in the fall).
Forward-Looking Adjustments for Negative HPA
Because home price in the market move slowly, there is the potential for an investor to project forward price decreases and potentially short or otherwise arbitrage forecasted price declines.
To prevent such opportunistic trading, the Manifest applies a conservative adjustment when models expect a near‑term decrease in a specific property's value:
For each property, internal modeling (AVM trend breaks, local market indicators, macro HPA factors) produces a forward path including any projected dip.
If the model indicates a probable decline from the current AVM to a lower trough (the expected near‑term nadir) within the defined forecasting window, the protocol immediately substitutes that expected nadir price as the property's effective "current" price for NAV purposes.
Subsequent forecast estimates can move the valuation back up only when the subsequent forecasts are above the current month forecast (the near term nadir).
Rationale
$USH token daily increases only positive other than when forecasts change: Investors can expect that if they want exposure to the US housing market, any price declines projected in the next three years are already captured. This helps with long term investing and reduces the pressure for market timing.
Short‑capture prevention: Closes the opportunity for actors to establish low‑risk short exposure (e.g., borrow/sell, hedge via liquidity positions) ahead of a modeled decline and later cover after a NAV markdown.
Risk discipline: Prevents temporary overstatement of realizable value in softening sub‑markets.
Asymmetry & Limits
Only downside expectations are accelerated; the protocol does not pre‑mint upside based on unverified appreciation forecasts.
Governance may review parameterization (look‑ahead window, trigger thresholds) but cannot selectively override individual properties for preferential treatment.
Effects on Other Mechanics
Daily Minting: Lower effective portfolio value reduces excess return for that day, marginally decreasing distribution to $sUSH stakers.
Reserve Pool: Earlier downside recognition can reduce future negative reconciliation surprises.
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