TFTC: A Bitcoin Podcast - #791: The Bitcoin Playbook for Commercial Real Estate Owners & Investors with Chris Drzyzga

Episode Date: September 9, 2026

Chris Drzyzga, commercial real estate broker and investor, returns to break down his new Bitcoin playbook for CRE owners and operators. Marty and Chris dig into building a three-tranche Bitcoin treasury, using Bitcoin as a fifth return driver alongside NOI growth and cap rates, tax-loss harvesting Bitcoin gains, dual-collateralized loans through Battery Finance, and mining Bitcoin for building heat. They also cover Bitcoin rent payments, security deposits, and how Bitcoin-friendly tenants boost asset value amid ongoing monetary debasement. Chris on X: https://x.com/ChrisDrz The Bitcoin Playbook for Commercial Real Estate Owners & Investors: https://www.tftc.io/CRE STACK SATS hat: https://tftcmerch.io/ Our newsletter: https://www.tftc.io/bitcoin-brief/ TFTC Elite (Ad-free & Discord): https://www.tftc.io/#/portal/signup/ Discord: https://discord.gg/yHGkvYxdqT Opportunity Cost Extension: https://www.opportunitycost.app/ Shoutout to our sponsors: Block: Cash App: For a limited time, new customers can get $21 added to their balance. Just use code TFTC10 when you sign up, and send at least $5 to a friend in the first two weeks. Terms apply. Bitcoin services by Block, Inc. See the Bitcoin disclosures at cash.app/legal/podcast. Square: Visit http://square.com/go/tftc for up to $200 off eligible Square hardware. Bitkey: Use code TFTC10 for 10% off the new Bitkey. Aven https://www.aven.com/bitcoin CrowdHealth https://www.joincrowdhealth.com/tftc Simple Mining https://www.simplemining.io/tftc Salt of the Earth: https://drinksote.com/tftc Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Newsletter tftc.io/bitcoin-brief/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Nostr https://primal.net/tftc Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/ Disclosure: Bitcoin services are provided by Block, Inc. Bitcoin services are not licensable activity in all U.S. states and territories, and not all services are available in all states. Bitkey is not available in New York. Block, Inc. operates in New York as Block of Delaware and is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Bitcoin is a non-deposit, non-bank product that is not FDIC insured and involves risk, including monetary loss. For additional information, see the Bitcoin disclosures: https://help.cash.app/btcdisclosures Get up to $200 off Square hardware when you sign up at http://square.com/go/tftc! #squarepartner. Offer expires December 31, 2026 at 11:59 pm PST. Offer for $40 off the cost of one Square Stand, $75 off the cost of one Square Terminal, $100 off the cost of one Square Handheld, or $200 off the cost of one Square Register, excluding applicable taxes. Limited to one discount per product type per seller account. Each code is limited to one redemption per account holder. Valid for new Square customers located in the US only. Offer not valid with guest checkout. Square reserves the right to modify, revoke or cancel the offer at any time. Offer cannot be combined with any other coupon. Void where prohibited, not redeemable for cash, and non-transferable. #squarepartner #blockpartner

You've had a dynamic where money has become freer than free. If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bold case for Bitcoin. If you're not paying attention, you probably should be. I wore this hat specifically for this because I think it's a key meme that aligns very well with this playbook that we're going to discuss, Chris.

I couldn't agree more. Well, thank you coming back on the show. We're here to discuss another playbook, one which you wrote and we're going to talk about today. We're publishing through TFTC and we're going to record this episode. going through the playbook. The playbook is the Bitcoin Playbook for commercial real estate owners and investors. You were on the show probably almost exactly a year ago.

Yeah, about a year ago. About a year ago where we talked about Bitcoin and commercial real estate. From a high level, you've spent some time really digging and putting together this playbook. Not only that, but have implemented the playbook and practice with a couple of projects, which we'll talk about.

But before we jump into the playbook, maybe for the audience who may not be familiar with your background when we give a brief intro, and then after that, what the listener will learn if they stick around until the end. Yeah. Thanks again for having me. I'm excited to be back and run through the playbook here with you today. As far as like my background's concerned, I'm a commercial. commercial real estate broker and investor based out of Southern California, been doing it a little

over 16 years now and found Bitcoin along that journey. And when I found Bitcoin, I started to try to think about different ways to integrate Bitcoin into the commercial real estate asset so that it was better positioned to navigate the new economy they were inevitably going into. And over that process, over that timeline, there were, you know, a few different categories that I kind of came up with to, you know, integrate Bitcoin practices and policies into the asset. And that can be from a, you know, a single asset, single property perspective or across a broader portfolio. Yeah. So, and that's kind of how we got here today was, you know, following our conversation about a year ago. I think I had laid out my personal outlook on the commercial real estate industry at large

and some of the really major headwinds that were on the horizon. Some of those headwinds were widely accepted by the industry and others less so. And just to kind of run through them, the first one had to do with accelerating monetary debasement. the second one had to do with the growing economic and functional obsolescence that comes with aging buildings and aging inventory across the country. And the third was Bitcoin as a superior store of value, the rise of Bitcoin as a superior store of value and the fact that capital has more options than ever before. And ultimately connecting those three onto the commercial real estate industry, what were the implications of that?

And as I was getting ready for our conversation today, I was like, hey, let's take a look back and see what happened over the last year. Well, on the monetary debasement point, the monetary base expanded another five and a half percent, give or take, over the last 12 months. On the aging inventory category, we are in the midst of the largest scale. demolition and redevelopment cycle. The industry has experienced in many years. Today, most of that is concentrated in the office sector, but in my opinion, that will eventually make its way into other property types. And then third, with the rise of Bitcoin as the new apex financial asset, that has implications for valuations and capital allocation, not only across commercial

real estate, but across all markets and investments. And you start to look at some of the milestones that Bitcoin and some of the adjacent products have achieved in such a very, you know, a short period of time. The ETFs, some of the most successful products in the history of Wall Street, digital credit products such as STRC going from, I think it was a $2 billion IPO to $10 billion in a year. And products like SETA, they didn't exist when we chatted last time. And today it's paying daily dividends. And those are just a couple examples of Bitcoin doing its thing and continuing not only its maturation, but it's integration into markets and business.

And so for the next hour or so, we're going to walk through this in the perspective of somebody who owns a building. So how do you apply Bitcoin strategy in commercial real estate? How do you figure out what cash you can allocate to Bitcoin? What changes about your financing when you're getting into this and whether mining has any place to play in operations as well? So thinking about waste heat.

So, and then we're going to go over some details about live projects that you have been working on extensively for a significant period of time that actually have real world data backing the strategy. But I think you alluded to it a bit with other products like Stretch and Seda. But when it pertains to commercial real estate, why combine real estate and Bitcoin instead of just choosing one? Yeah. Bitcoin is giving owners a new tool that complements and enhances the real estate. It allows you to preserve your purchasing power. It allows you to build and maintain reserves, whether that's for maintenance or capital expenditures. It allows you to improve your creditworthiness. It allows, allows you a new form of collateral. And these are all things that real estate owners are constantly trying to improve.

And because of the design of the system today, they have constantly fallen behind, right? They are unable to build the reserves. The goalposts are constantly moving further away from them. And now with Bitcoin, they are able to solve. a lot of those problems a lot better. And real estate owners are very familiar with the primary, like four primary drivers of value. You have NOI growth. You have cap rates.

You have leverage and capital improvements. And when you're integrating Bitcoin into the real estate, it introduces a fifth return driver. And I refer to it as balance sheet appreciation. So when you're holding Bitcoin, whether that's the property level, the entity level, what have you, a portion of that value is no longer tied to the specific property, the specific tenant, or the local market that you operate in. Yeah.

And so let's dive right into building a Bitcoin treasury and starting with every other expense that comes first before you can. even happen to Bitcoin. So rent comes in when we walk the audience through what has to be funded before any of that money goes into Bitcoin, how should you approach covering the basics before getting into the strategy? Yes. Rent comes in from the tenant base. And from there, you use that rental income to cover your operating expenses. And that is everything from electrical to taxes, insurance, labor, administrative. I mean, it's the overhead of running a business, right, just like anybody else. And from there, you use the net operating income to cover your mortgage expense.

And after those two major categories have been covered, you have your free cash flow. And that is the amount, or that is the line item that real estate owners should be looking at and saying to themselves, what percentage of this cash flow should be held in Bitcoin rather than US dollars or US dollar equivalence? And then that gets to the question, okay, how do you decide how much Bitcoin to buy? And I think more importantly, through our discussions over the summer, like what frameworks should you have in place before you even make the purchase? Like, what do you need to set up?

How much should you buy? and before you even make your first purchase, what processes and frameworks should you have in place? Yeah. I mean, the first thing I want to address is, you know, this Treasury strategy, right? I feel like over the last couple of years, the Treasury strategy has just been made far too convoluted, right? At the end of the day, treasury strategy, the way I look at it at least, is a fancy term for cash management, right? How are you managing your cash?

And over the past year, two years or so in having the conversation with real estate owners trying to convince them about this Bitcoin strategy or this Bitcoin approach, the biggest objection or the biggest pushback I've gotten is the volatility, right? And understandably so. Real estate is a capital-intensive business. So the owners and operators carry larger cash balances than most of. others would. Right. And then you introduce the volatility of Bitcoin and it's just, it doesn't mix very well, right? It's like oil and water. Right. So what we, what I laid out in the playbook was a,

I advocated for a three tranche treasury strategy. And what that does is it basically broke out your cash needs over three different buckets, three different time horizons. And you're using different instruments and each of those three buckets to operate the property, preserve your purchasing power, what have you. So we touched on it a few minutes ago. The first thing you have to do is you need to understand what the cash flow needs are of the property. What are the expenses? What's the debt service? How much is left over? And once you've done that math, then you can start to basically divvy up these three buckets, right? So bucket one would be your short-term immediate cash needs, right? So call it months one through three, right? Don't get queued here. This is just a,

you know, US dollars in a checking account to cover the daily and immediate operational needs, right? The second bucket is your intermediate reserves. And the goal here is you're still going to need these reserves. You just don't need them in the next 30 to 90 days, right? So the goal with the intermediate bucket is to make those reserves work harder for you, right? And making sure that you are, they're low volatility and you're maintaining the principle. There's some stability and the principle is incredibly important as well. Because this intermediate bucket is going to be solving things like,

tenant improvements, broker commissions, legal fees, tax payments, partnership distributions, right? So it's very important that they remain liquid and stable as far as the principal value is concerned. The third bucket is your longer term capital, like your longer term strategic bucket. There you go. Perfect. And this is where your Bitcoin allocation goes. I think I think I'm on that intermediate bucket, that could look something like months three to 12, three to 18, whereas the long-term strategic capital is 18 months or longer, right? This is strategic capital. You're not trading it.

It's ideally held in some form of self-custody, multi-signature setup, cold storage. That is incredibly important, important to note. Yeah. And when thinking through all these different options, I mean, I think getting more granular into, I mean, you mentioned spot Bitcoin, long term cold storage in multi-sig. What in terms of the intermediate, like, what would you say is the most important thing within this framework to focus on immediately out of the gate? or where do you have the most success when you focus on one of these buckets more intensely, if that makes sense? Yeah. It comes down to the property and the investor and what their understanding and comfort level is

with all of this to begin with. No two properties are the same. No two situations are the same. So you have to really approach them independently of one another. I would say the intermediate bucket is probably the most. important starting point because that's that has a direct tie to your ability to operate the property in the short term, right? If you mess up the intermediate bucket and you just, you go straight to, um, uh, to Bitcoin, you could find yourself in a tough scenario if you,

you know, if the price falls out and, you know, you find yourself on a bare market or some unforeseen set of circumstances. So sizing the buckets is incredibly important and also setting the timing is incredibly important. I used 18 months there for a couple of reasons. From a real estate standpoint, 18 months is kind of table stakes, right? Getting sizable leases done and 10 improvement projects, it is not unheard of for those to take 10, 12, 15 months, right? From a Bitcoin perspective, 18 months was the longest bear market. So I kind of backed into that timeline from both vantage points, if you will. Yeah.

And then you also, in the playbook, you lay out different levels of conviction and how you should approach the the strategy there. So just giving, obviously, some people are going to be more bullish on Bitcoin than others, but giving options across the spectrum of people who say, hey, I think I see some value here. What is the minimum viable allocation I need to a hardcore Bitcoiner who also ends a large or small commercial real estate portfolio saying, I want to incorporate this to its fullest extent?

How should anybody listening approach to that? Yeah, I mean, if you're new to all this and you're still trying to get comfortable with it and understand all the ins and outs, I mean, my opinion is a conservative allocation is 5 to 15%. And again, that is your, that is out of the free cash flow, right? After you've paid your expenses, after you've paid your mortgage, what's left over, you know, five to 15% of that figure, right? And as far as implementing that, that's, that's more than likely a DCA over a period of time, right? For those that are a little bit more comfortable with this, I'd say you're 15 to 30, 35% of those excess reserves. And then for the Bitcoiners that happen to own real estate, I'd say you're 35% plus. In those two latter categories, it's probably a combination of lump sum and dollar cost averaging over a period of time.

Well, I think this is a good point to jump into the live examples because based off of what we've discussed behind the scenes over the last two months, it seems like there is an implementation formula. We're talking when to buy, how much to buy when, when to lump sum, when to DCA, when to rebalance. What does that look like in practice and how important is setting up a strategy that you stick to out of the gate? Let me start there because that is absolutely critical what you just said, right?

Making sure that you have a strategy, a defined strategy before you go and implement it. Right. Don't shoot from the hip and just start buying Bitcoin. You want to have a defined framework, policies, procedures, you know, a decision-making tree to help you navigate the strategy. because you want to be able to allocate and rebalance based off of policy, not emotion, right? That's how you're going to get burned. So that's step one, is define what those policies, procedure, and, you know, broader framework look like. From there, and you understand you, from there, you want to, you can start allocating a percentage of the free cash flow to your different buckets. Right. The intermediate bucket can be, you know, T bills. It can be, you know, high yielding dollar instruments, what have you. And then you have your spot Bitcoin in the third bucket. And I forget what was the question again? I kind of got off on a tangent there. Like how important is implementing the strategy first and then what does it like going through a lot, a couple of live examples that you have? What does it look like when it's has it's been implemented in the real world?

Yeah. The one client that you're likely referring to was a weekly buy. So it was a large facility in the Northeast U.S. We were buying about $10,000 worth of Bitcoin every single Monday from the free cash flow of the property. And that was done in a very systematic, consistent basis for a little over a year now. So they went up the last cycle and they DCA'd all the way through the bottom of this of this current cycle as well. And they were a little bit unique because they were a long-term holder. They had very low LTV. They only had about 30% LTV on the asset. So they had a little bit more flexibility than most others. So they were able, from their treasury strategy, they were very, very convicted on on Bitcoin. They had a very high percentage of Bitcoin exposure every single week.

Because of the low LTV on this particular property, they were able to take out a very small conservative loan on the property, small, low six figures. And they put that, those tax-free proceeds into STRC. And we referred to that as as digital rent, right? I thought of it as like, you know, real estate owners are always looking for supplemental sources of income, right? The most similar here or the best example comparison is a cell tower, right? You get a Verizon tower or an AT&T tower on your roof and they're paying your rent, right? Fantastic way to add value. In this scenario, they were able to use that digital rent as a way to enhance the net operating income.

of the property, which in turn allowed them to increase their Bitcoin purchases on the back end. So in a very short period of time, about 13 months, they were able to accumulate a treasury, a strategic treasury, that can cover a little over seven years of mortgage payments, which is incredible. So if something really went sideways in the economy, you know, another 2008, situation or another black swan type of event, you know, the operator gets hit with a bunch of vacancies and delinquencies with the tenants, worst case scenario stuff. They could sit back and they could make their payments and weather the storm for up to seven years. So that's a really good example

of the optionality and the flexibility that a strategic reserve lends. to a real estate owner because nobody wants to, you know, you don't want to be forced to make a decision, sell a property, you know, make a maneuver when you're forced to, right? Like, that's bad. So if we can give ourselves the runway to essentially sit and do nothing, that is oftentimes the best thing to do in periods of disruption and turmoil and uncertainty. But then the context, what does the average property have in terms of amount of mortgage payments they have in reserve that they can stomach? To my knowledge, that is not a metric that commercial real estate folks track today.

What I can tell you is that the vast majority of operators are running on very, very thin margins. So if I had to put a timeline to it, I'd say you're talking a few months, a couple quarters, at the most. If you get, if you have a scenario where you're beyond a year, I think you're going to be in some very exclusive company, right? And, you know, I want to just kind of put a disclaimer there. right? There are all different kinds of owners, all different kinds of ownership profiles. You know, you have the long-term generational owners that have had the property forever, right? Their tax basis is a very different situation than somebody that has been buying and selling over the last, you know, decade, right? So it's very, very nuanced, very specific to everybody's situation, the property type, the market you're operating in.

But to your question, most real estate operators have a much thinner set of margins than this gentleman does. Well, to really round out the strategy side of things, too, there is a tax planning component to this as well, too, right? Like when it comes to rebalancing and taking advantage of dips when they do happen not only by buying, but harvesting some tax losses as well. That's exactly right. And that coincides with what I mentioned earlier, Bitcoin being the fifth return driver, right? Because you have this asymmetric opportunity, this asymmetric asset with Bitcoin. But now because of the classification, it's designated as property, the wash sale rules do not apply. So you start building up this Bitcoin treasury over a period of time. You're going to have. have different bases in your reserve, right? And this is where the policies and the procedure and the record keeping that I mentioned earlier become incredibly important. Because, you know, for example, last this time last year, we were at, you know, six figure Bitcoin, $120,000 plus Bitcoin. Today we're, I think, somewhere in the high 70s. So because of the rules and the, the,

classification that Bitcoin has, you are able to sell some of the higher cost basis Bitcoin, capture the tax loss, and buy it right back. So this client that we were talking about earlier with the seven years of mortgage payments in their reserve, we executed one of these transactions and we sold some of the Bitcoin that they had purchased north of $100,000. And without getting into all the technicals, we were able to create a just under a $300,000 loss that they were able to carry forward in perpetuity and utilize in a number of different strategic ways in the future. And they lowered their cost basis in the Bitcoin from the high 80s to the low 70s. So it was actually third, which was made this thing an absolute home run.

is when we executed the transaction, we were able to actually buy back in in a way that was a net accretive transaction in terms of Satoshi's. So we were able, that was after transaction fees and all of that. It was a net accretive transaction in terms of Bitcoin. So they got the tax loss. They lowered their basis in the Bitcoin. And they came out of the transaction with more SATs than they started with. So that's a perfect situation. That's an ideal scenario. That's not always going to be the case. But in this one, it, you know, the stars aligned.

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You can access it for free at simplemining.io slash TFTC. That's simplemining.io slash TFTC. Well, and I think it's a testament to having a strategy going in and then a policy and then sticking to it when the pertinent triggers get triggered. It's like, okay, Bitcoin's 60% below. or 50% below. Some of the Bitcoin you bought at this level, the policy says you do a wash trade

to lock in some tax losses and buy back, and you don't even have to think about it. It's just there. That's exactly right. The value that comes from that pre-planning is very difficult to, you can't quantify it because it's going to help you execute

in times of, of a lot of noise and to be able to fall back to those frameworks and guardrails essentially are critical. Yeah. And now moving on to the capital stack, Bitcoin has a collateral assets for anybody who wants to reinvest in property that they already own or go out and expand their portfolio. How should anybody listening to this who's in commercial real estate view, Bitcoin is of the capital stack for these endeavors.

Yeah, capital stagging in CRA is a very broad term. It's used very loosely. So the way that I kind of thought about it for this playbook was how should owners be thinking about financing properties, structuring their debt, raising capital. That's a big one. And using their collateral. In today's world, lenders underwrite the rents and LTVs, leases and tenant credit. On the other side, the equity investors are underwriting yields and

appreciation, the tax benefits, and hold periods. So for better or for worse, this creates a bigger issue. And what that issue is, is that the borrowers are optimizing around the loan term rather than the long-term health of the property. So when you are integrating Bitcoin into the capital stack, into the financing, you are able to kind of realign the incentives between the two parties, the borrowers and the lenders, and help them think long term again, rather than that, you know, five to seven-year period or, you know, whatever that next loan maturity is. Yeah. And the issue, sorry to interrupt you there, the thing I'll say there is,

because the borrowers are so fixated on that, on that loan maturity, they often sacrifice the operational improvements, the capital expenditures, because the thought process is, well, why would I dump a bunch of capital into this asset if it's going to only benefit, if it's going to benefit the next owner more than it's going to benefit me today? Right. So that's why I say it realigns the incentives and gets the operators to think longer term again. Yeah, this reminds me a lot of what our friend Leon's written on this subject about reinvesting in properties to make sure that your tenants are actually having a good experience at the end of the day too. But that cannot be overlooked because tenants are the lifeblood of commercial real estate, right?

I mean, you obviously have the land value and the physical structures. But the tenant that you lease to, that is how you drive premiums in asset values. So you got to make sure that you have good relationships with the tenants, with your tenants. they have a good experience at the property and, you know, the relationship is, you know, symbiotic. Yeah, and I think we'll get into that later, how applying a Bitcoin strategy to your commercial real estate portfolio can actually help you attract better tenants, higher quality tenants at the end of the day as well. But before we get into that, sticking on the capital stack, just walking through two examples, again, like a cash out refinance. either to acquire more Bitcoin or using Bitcoin as collateral to get that cash to do other things, and then for new acquisitions, Bitcoin in the capital stack for new acquisitions.

Yeah, let's start with the cash out refi because not only is that the kind of the simplest starting point of the simplest example, but that's where the majority of the action is in this space. So I guess starting from the beginning, commercial real estate loans are typically, they come due every five to 10 years, give or take. That's kind of the time horizon that these operators are optimizing for. So when you have your, when you're approaching your, your lenders about the next refi, you are, you are now able to introduce a new product that gives you Bitcoin exposure in one way, shape, or form. For the client I was referring to earlier, they're Bitcoiners that own real estate, right?

They're very comfortable with it. They're savvy in all things, Bitcoin and real estate. They were able, they're looking at doing a cash out refi themselves, right, with a traditional lender. And they're going to use some of the proceeds, the tax-free proceeds from that refi to add to their Bitcoin reserve, right? And that's going to, you know, be long-term strategic capital. For the vast majority of operators that are not that comfortable or not that technical with these things, there are loan products out there today. The guys that battery finance are probably the most popular example today, where they're doing a dual collateralized loan, right? So you're

you're doing a traditional refinance on the property. The proceeds that come out of that refi are getting divvied up into different buckets. One of those buckets happens to be cold storage Bitcoin. And the borrower and the lender are participating in the upside over that duration, that five to 10 year period. And it's important to note that that is not a trading position, right? It's not a mark-to-market margin loan. It is a long-duration credit structure that the Bitcoin just sits there.

It's not moving, right? So we think about, we talk about a lot in the space about long time horizons and long-duration assets. Real estate and Bitcoin are the perfect marriage because they're both long-duration assets. And you can see just looking at the pricing history of Bitcoin, if you are able to get some exposure today, you're more than likely going to do quite well over a five, seven, ten year period. And that gives the borrowers a lot more, a lot more optionality, right? It helps them maneuver more effectively when traditional credit markets may be constrained,

right? It reduces their need to sell assets at, you know, unfavorable times or price. prices, and they can also focus on the operational objectives of the asset. So there are some really, really important benefits that the borrower is afforded. And then from the lender's side, it strengthens their collateral package and reduces the overall risk profile. There's a number of different uncertainties that come along with real estate from the lender's perspective. Foreclosures are one of them, valuations, tenant issues, maintenance, all of that. kind of stuff. So to be able to have a

superior, a second form of collateral sitting next to the real estate that has the features that it has, it gives the, it's able, it provides both parties with the, the benefits and the flexibility that we're talking about here. Yeah. And I think when you're approaching that too, especially if, you know, if you're listening to this and you're saying, hey, I got a loan come and do in the next year or two, the question you should ask yourself is, you know, how much equity should remain trapped in that illiquid real estate? Right. That's probably a good starting point.

And from there, you can start to do some of the back of the napkin math that I mentioned earlier and understanding not only the use of proceeds, but also sizing those different positions as well. Right? You take out a million bucks from a property. How am I divvying up that million bucks? Right. There's probably going to be a certain percentage that's going to go to operational needs and property improvements. There's probably an allocation to that intermediate bucket, right, to help with, again, the operations of the property. And then there's going to be the percentage or the allocation of those proceeds that go into your long-term strategic reserve. Freaks, look at me. I'm glowing. I've got like an Angels halo going around me.

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particularly for how beneficial it is for both sides of the transaction, of the transaction, debt deal for the lenders specifically i think pairing to long-term duration assets that have different risk profiles and different liquidity profiles i think the liquidity of bitcoin being included in a collateral package is very much underappreciated right now and the combination of of the do can't be overstated uh it makes too much sense and to your point uh about these these loans being five, seven, ten years if you're able to get into a 10 year loan and catch two Bitcoin bull cycles. I mean, I think Andrew in the team of battery has shown some projections using Bitcoin's historical caggers that show like the Bitcoin and the collateral package could be worth more than the real estate when you initially took out the loan, which is fascinating.

Yeah, absolutely. Yeah. So moving on to the operations. side of things, protecting your net operating income and creating new revenue streams, how does Bitcoin playing to this part? Like we're talking about a full integration here, not just on the capital stack. Yeah. This is one of my favorite categories, if I'm being honest.

And when I say operations, the most common things people point to right out of the gate are accepting rent payments in Bitcoin and the security deposits. And both of those are great. I think on the rent payment side, today, the value there is more intangible. The reality of it is you can issue a policy to the marketplace that you're accepting Bitcoin rent payments. What is the, you know, in practice, what is the likelihood of your tenants' payments? in Bitcoin, it's low, right? So I think the reason I say it's more intangible and symbolic is because of the signal it gives to the marketplace, right? You're signaling to the market that you are

not only Bitcoin friendly, but you are future looking, you are tech forward. You understand where this is going. And that in and of itself is going to separate. your properties from the rest of the market. Those properties are going to, in turn, attract a certain type of tenant. They're going to attract a certain type of consumer. And over a long enough period of time, that becomes a flywheel in and of itself. Over time, I think more and more tenants will take you up on that rent payment option, but today less so. The security deposits angle is very interesting.

I can think of a number of different scenarios where that would solve problems and get deals done and ultimately lower the risk. Landlords and tenants, for that matter, are routinely negotiating deposits because of maybe the financials of the tenant are a little thinner than what you would like to see when you're signing a long-term lease or the landlords contributing an above-standard tenant improvement allowance, you look at Bitcoin deposits. That is a really interesting way to offset a lot of that risk. So before I get too much further into that, it's important to note that the laws on security deposits and how they can be used and held

very state by state. So you need to understand what your jurisdiction permits and doesn't as a starting point. And from there, I would, it'd be best to start off with a new lease, right? If you're renewing a tenant and you're just drafting a simple amendment, I probably wouldn't stick in the amendment that we're now accepting Bitcoin security deposits, right? You need to kind of have a clean slate, go through the iterations with. your counsel and come up with a solid structure around that. But that aside, I think the Bitcoin security deposits can play a really interesting role in reducing risk for both parties. And, you know,

at the end of the lease, again, three, five, seven year type of durations. If the tenant moves out, there's more than likely going to be an appreciation component that deposit. You know, what is that profit split look like? Is it 50-50 or is it some other breakdown because of the nuances that came along with that particular transaction? So you have rent payments, you have deposits. My favorite, the third category on this operation side is how can you integrate Bitcoin mining into the mechanical systems of the of the property. And I think where most people get it wrong is they come at it from the standpoint of,

can my building mine Bitcoin profitably? And the answer to that, you know, nine out of ten times is going to be no, right? The, they are unable to compete with the hyperscalers, the data centers, the, you know, the industrial and institutions. mining operations of the world, right? So it doesn't work when you come at it from that standpoint. But if you can kind of flip the question upside down and say to yourself, like, my building already consumes energy and it requires a ton of heat, right? Can Bitcoin mining improve or reduce the cost of what the property is already doing? The answer there is more than likely yes.

right? So commercial real estate owners need to look at it from the stamp. They should ask them, you know, look at a minor as a heater, right? A boiler supplement or a hot water source. It's not a minor that happens to produce heat. It's a heater that happens to pay you in Bitcoin. And when you make that shift, the options open up significantly. Yeah. I think that mental flip is very important. Yes, absolutely. And so we have it up here, mine to heat, mine to reduce net energy costs, mine to maximize Bitcoin output. And these three scenarios are different for different individuals with different setups, different properties that they own. And you go through that here where it makes more sense. If you're looking at a property breakdown from multifamily to hospitality, industrial,

So slash flex, office, retail, medical health care, self-storage, land, et cetera. Some of those three options makes more sense for each of these types of owners here. Yeah. And going back to the three different modes, if you just want to scroll up there real quick, when you come at it from, can Bitcoin mining, you know, improve what I'm already doing, right? You're either going to be mining to heat the building or you're going to be mining to reduce the overall energy cost. And I think I mentioned at the top of the show, operating expenses, energy is part of the operating expenses. And as an average, energy is 30% of those operating expenses.

And most real estate owners come at it from your traditional standpoint as far as like being energy efficient, right? solar, new window tints and films, sensors, right? Like all those mechanisms that were all used to. The Bitcoin mining is the next evolution in that energy efficiency strategy or approach. The third category is just mining to maximize your Bitcoin output. Most people are not going to find themselves there, but some will. It depends on the property. It depends on, you know, the market that you operate in. And, you know, you could also find yourself in a scenario where you're able to check all three of these boxes.

But I don't want to overpromise and under-deliver there. So most folks are going to be finding themselves in the first two categories. And from there, you know, as far as the property type and the location, each situation is different, right? So you have to assess, just like with the treasury strategy, you have to assess the market and the property, right? What is the source of the energy? What are the demand loads? What's the capacity of the building, right? Understanding what the best equipment is for the job.

You don't necessarily have to go out and buy the newest, most state-of-the-art miners to do the job. you can probably find some second or third generation machines that will serve the purpose rather nicely. Yeah, I think that's a very important detail to highlight. It's acquiring the right minor for the job that you don't want to overspend and not get the payback. And older model miners are relatively cheap compared to top of line. And another aspect, too, thinking about policy. and if you do decide that using minor wastey is applicable to your particular situation, you want to implement it.

You should have in the policy to scoop up miners when they're relatively cheap. When the price of Bitcoin falls, the cost of the A6 is very tightly aligned with the price of Bitcoin. And so for the last six months, it's been a great opportunity to buy miners. Yep, exactly right. And I mean, just tying this kind of to the real world, just like we did with the Treasury strategy, there is a, this is not a theoretical conversation, right? This is happening in practice across the country, across various property types. It started this movement started initially in the residential space for a variety of reasons,

but it's slowly making its way into the commercial. space. And there is a, there's a developer in Colorado that is doing a brand new, ground-up mixed-use development that is using Bitcoin mining as the primary heat source. The mining is part of the boiler system that is being used to heat the building. Colorado, colder climate, a lot of the, a lot of the year, there's a larger demand for heat than there would be in other areas. And when I was talking with him, this was a few months back, you know, he was telling me how the model that he put together had the Bitcoin output from the mining paying off the cost of construction in about 15 years. And that in and of itself was fantastic. It got me really excited.

But then my next question to him was, you know, what Kager did you use? And, you know, he told me 15%. So I just told them I think you're incredibly bearish, but coming at it from a real estate standpoint, knowing that your Bitcoin mining output can pay off your construction costs in that, you know, a very, you know, reasonable period of time is an absolute game changer. And just like we talked about in the capital stack section about reallining and set. and thinking longer term as well. If I'm an owner and I have a building and I can look at the building and say X amount of Satoshes are going to be produced through this building over any period of time. Now in that scenario, I'm incentivized as an owner to hold that building to optimize that

mining operation and keep the building in good shape. Right? So you can see across all the three of these different verticals, we're flipping the incentives on their head and kind of reinstilling some, what's the word, some integrity in it. Another example, we have the bathhouse in Brooklyn that uses miners to heat their hot tubs and jacuzis. I think they've been very successful with that strategy or expanding. their operations will be implementing the Bitcoin mining to heat the pools playbook in their new locations. And I think this is something, again, you have to flip the frame of how you approach this. Like, is this the best way to make Bitcoin wrong way to think about it? Like, how can this reduce cost and be additive to what I'm already doing?

That's exactly right. And I'd be remiss if I didn't bring up some of the challenges here. So because of where we're at, and this is this particular approach is as new as it is, there are issues with permitting and planning. Right. So when you're operating a commercial property and you're doing any kind of improvements, you need to get involved. The city is going to get involved, right?

Making sure that things are built to code and to certain kinds of specs. specs for Bitcoin mining in your mechanical systems don't exist yet. So there is a little bit of a trailblazing component here. And I think it actually lends really well to the private owners, right, large and small. Because the private owners are going to be the ones that, one, are not only willing to do this, but they're also kind of willing to ask for forgiveness, not for permission. if I'm allowed to say that, where they see the value, they want to go, you know, beta tested on one of their properties and see how it turns out, right? And from there, they're going to, you know,

be able to build out their energy strategy around mining. And the REITs, the institutions, they are not going to take on that risk, full stop. Right? They have. to do things by the book, they, they are just unable to, um, to take on that additional risk. So I think there's, there's a, a runway here for the private owners, um, that will ultimately turn into a moat or a competitive advantage, uh, over the, you know, the medium and even long term. Yeah. That makes a lot of sense.

And I mean, we'll get to that to the overall advantages of beginning to apply this strategy, um, towards the end. end of the conversation, what is the early mover advantage? But before wrapping up the operation side and calling back to something I mentioned earlier, which is Bitcoin-friendly tenants and asset quality, what does this do for the overall quality of the properties that you own? Yes. So as I mentioned when it came to the rent payments, right, in today's world, it's mainly symbolic, right? It's a nice to have. It's a nice offering to present to your, to your prospective tenants. Over time, more rent payments will be made in Bitcoin. But today,

the value is what it signals to the market. And you and I both know, your listeners are going to know that businesses and individuals that operate from a Bitcoin standard in one capacity or another, they are operating from a fundamentally stronger position than those that are not. Right. And so, and going back to the point we made on tenants being the lifeblood of commercial real estate, right? If you and I are looking at acquiring a property, right, there are two identical properties and one of the tenants has a Bitcoin exposure and the other does not, right? Like, you and I both know which deal we're going to take 10 out of 10 times, right?

Because that tenant is going to be able to withstand fluctuations in the market. It's going to be able to handle changes in consumer behavior and consumer demand a lot better than the guy that doesn't. So, and as you scale this out over a shopping center, right, that's got 30 or 50 tenants, right? You scale it out over an office building that has a dozen plus tenants, right? So on and so forth, that flywheel gets spinning and it becomes incredibly, incredibly powerful. So I can see in the future, properties that have Bitcoin tenants or Bitcoin friendly tenants, they're going to trade at a premium. They're also going to be in a lot higher demand than those that are not.

Yeah. And then not only that, I know we've had this discussion in the past, too. And again, I think this is further down the line, but I did have my first brush in with a square merchant in Birmingham, Alabama, the other week. And I paid via Bitcoin. But, I mean, if we're really looking forward and thinking about a Bitcoin standard and thinking about tenants and the perspective of a commercial real estate investor.

And obviously the commercial real estate investors focused on their margins and their net operating income. But imagine a world where Bitcoin is truly being used as a payments rail. And you have many tenants who are square merchants as well. And they do a good job of articulating to their client base. Like, hey, we'd rather you use these Bitcoin rails to pass because the fees are significantly less, that increases their margins. It makes them a more financeable tenant at the end of the day as well.

Yeah, absolutely. I think what Square is doing and has done with the payment processing is an absolute game changer and probably one of the most notable milestones in Bitcoin in the recent years. I wasn't actually planning on sharing this, but because you brought it up, like, if I'm a, you know, if I own a property, I like to use the retail property or the shopping center as, as an example. And I want to encourage this type of commerce to take place. It would be really easy to set up like a lunch and learn with your tenants, right? Get your property manager out there, get some of the acquisition, the management guys. to go out to the lunch and learn, invite all the tenants, buy them lunch, and everybody learn how to

operate the square point of sales system, how to download a lightning wallet on their iPhone or their Android, and play around with some Bitcoin transactions. You're going to educate your tenant base and your own employee base for that matter, but you're going to create an experience for those tenants that is going to make that relationship more substantive and sticky. Right. That tenant's not going to forget. Oh, man, I downloaded my first Bitcoin wallet and made my first Bitcoin transaction here. Right.

And I bought a cheeseburger with it. Right. So that is a really cool way to approach this in a non-threatening way as a landlord, as a property manager. And, you know, to build the, the relationship. relationship within the community. You could do it with your tenants. You could even open it up or do a separate event for people in your local community.

Come on out. We're going to host this event one afternoon and we're going to show everybody how to do this. Relatively cheap, high leverage activity right there. Absolutely. Absolutely. You go to the, I think your initial question had to do with brand and asset value. Well, we already talked about the asset value. what I just said with the lunch and learn,

that goes directly to your brand value. If I'm a business owner, regardless of the industry or the size business I have, I want to go do business with you. I want to lease space at your property. Yeah. Agreed. I mean,

that ties nicely into the last section of the playbook that we'll discuss here. There are a couple more sections, but I think we'll leave a cliffhanger. So people are more inclined to go download it to figure out what the strategy actually looks like and some practical use cases that they can dive into, but just ending and piggybacking all what we're just discussing on the three recurring value drivers

and maybe just starting by piggybacking on that, the brand value and first mover advantage and then getting into optionality. and tax officers today. Yeah. So the three reoccurring value drivers across not only the playbook, but the strategies we're discussing here today. One is brand value, asset value, and first mover advantage.

I think there is an incredible opportunity for private owners, whether it's an individual, a partnership or a family office, to start educating and integrating these types of strategies into the real estate. Start small, start with just an individual asset, use it as the test case, and go from there. I think there's an incredible competitive advantage and moat that you will develop in a very short period of time by doing this. The second driver is optionality. Optionality and flexibility come up time and time again when you're thinking through the macro environment. You're thinking through your local community and the micro environment, essentially.

It comes up time and time again when you're thinking about the operational needs, the curveballs that come up, the issues that come up. with real estate and to be able to do nothing a lot of the time is the best course of action, at least as a starting point. The other side of that is when you're able to preserve purchasing power and outpace the rate of monetary debasement, you are able to be a better owner, operator, and investor. Your properties are going to maintain their value better and longer. you're going to be more profitable, you're going to be more competitive in the marketplace. Tenants and businesses, consumers, they're going to want to come to your property because it's very evident that you have that pride of ownership, you have the balance sheet that is

required to operate and execute at a very high level. And the third value driver is your tax efficiency. We touched on it a little bit at the beginning. there, the tax lost harvesting components that exist or opportunities that exist. But commercial real estate is already a tax advantaged asset. That's one of the primary attractions as a financial investment. You have all the, you have cost segregation and interest deductions, 1031 exchanges, what have you. When you pair Bitcoin with commercial real estate, it's, you have, it. It's, you have, It's kind of like a superpower.

Again, because of the classification that it has currently. And the way that you're able to use the real estate proceeds, right, whether it's cash flow or refi proceeds, the mining, there's a tax component there. The mining, we didn't even talk about it, but you not only can offset your energy costs, but when you bring the miners into this scenario, you can depreciate those in year one. So there's a tax component there as well. And those are all savings and benefits

that are going to fall directly to your bottom line almost immediately. Yeah, it's pretty beautiful. And then going back to optionality too, combining optionality with first mover advantage, as you were explaining both those levers. if you're a first mover, you build up the Bitcoin treasury

and the capital stack and you apply the strategy correctly and your competitors don't. Like if you want to expand your commercial real estate portfolio in the future, who's to say you can't get cheap real estate and then go apply to strategy with those assets

that the previous owners didn't take care of because they weren't applying a strategy like this. Marty, you're getting into the 201 level here. You get to a point where you have the strategic reserve, right? And now you come into a time in the market where there's disruption, right? Because of the features and the profile that Bitcoin has, you have the ability to move a lot quicker and offer more attractive terms than your competition. that doesn't have that. So, you know, I could see it as a really, really valuable acquisition tool as you get into the future here. And that client I was referring to earlier,

their, you know, massive strategic reserve, that is part of the strategic roadmap. Is they're going to leverage that Bitcoin balance sheet to acquire assets when the opportunity presents itself. And because they have that, they are not beholden to the sentiment in the real estate market or the credit markets or, you know, et cetera, whatever their bank says, right? They have a lot more autonomy to make those decisions as they see fit. I mean, maybe we're going to get into 202, but we don't have time for it, but maybe that's a conversation for another day. But later on the productivity gains that can come from applying AI to whether your company as a commercial real estate investor or just at the at the property level utilizing these incredibly powerful

tools to create even more cost cutting and efficiencies. 202 call it 301 because you're you're exactly right. I mean the real estate is becoming a much more difficult business than it has been the last 25, 30 years. And in the future, the most successful real estate operators are going to be experts in multiple disciplines. They're going to be experts in real estate, Bitcoin technology slash AI. I lump those into the same bucket and then energy. And they're going to be able to implement and execute all four of those. categories on a on a real estate asset at a very very high level those are the operators that are going

to outperform the market they're going to attract capital disproportionately um and they will ultimately be you know the highest in demand well chris i i really appreciate you uh creating this playbook number one and i feel incredibly fortunate that um we are launching this together It's an honor to do this with you, sir. So if you are picking up what Chris have been putting down for the last hour and seven minutes, go to tfTC.io slash CRE, download the playbook, look through it, and if you have any questions, Chris is the man to talk to when it comes to this. And on that, any final notes before we officially wrap up here.

Yeah, thanks so much for having me, Marty. The feeling is very much mutual. absolute honor to, you know, do this in conjunction with, with you and TFTC. And I hope the market, market responds well to it and remains curious. I think the old playbook was more of a leverage first type of approach. And, you know, this new playbook is going to be, you know, balance sheet first. So those that can try something different and new, they're going to be, you know, going to benefit disproportionately. So thanks again for having me. And I look forward to coming back for the 301 level and we'll integrate all the AI stuff into the conversation from there.

That's going to be a fascinating conversation. TFTC.io slash CRE, go download it now. And that's all today freaks. Peace and love. Thank you for listening to this episode of TFTC. If you've made it this far. I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad free, make sure you download the Fountain Podcasting app. and go to Fountain.fm to find that $5 a month,

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