DomaCom Limited (ASX:DCL) CEO, Arthur Naoumidis discusses the company’s fractional property ownership platform and its latest distribution agreements.
DomaCom Limited (ASX:DCL) is a securitisation platform, whose basic job is to take big lumpy assets and divide it into bite sized chunks for investors, and particularly focusing on the financial adviser market.
So basically simplistically how it works, we’ve got a process that we call a bookbuild where investors syndicate together, to purchase any property that they choose. And that’s the first difference; the investors actually choose the property. And at the end, we create our managed funds structure for around each individual property. Now with regards to REITs, one of the issues with REITs is we all know that REITs attract equities. You might as well buy another equity stock. Whereas our investments are real direct property and the role they fulfil in investment portfolios, is to track direct property.
We’ve recently received a variation to AFSL, which allows us to deal in securities. So practically, what that means is that DomaCom now can fractionalise anything. And the first couple of cabs off the rank are mortgage-backed debt and also corporate bonds. So over the next couple of months, you’ll see in fact this’ll be the first I think, mortgage-backed peer-to-peer lending and it’s unique to our structure.
There’re several good lead indicators, so the lead indicator of the financial planner dealer groups are putting us APL, we’ve got 43 in our dealer groups, which is over five per cent of the market. So that’s really good. Now we’re trying to get these dealer groups to use us. We now have 10 of them that are active that we’ve acquired over 40 properties. So we’re starting to get some transactions now. Over the next few months, we’re hopeful we’ll see an acceleration of that now that we’re listed.
Our models are generally intermediated. So we’re focusing on the market connections to financial planners and dealer groups, that we had for many years before DomaCom, with my previous business Praemium Australia Limited (ASX:PPS). So really we’re marketing to advisers, to help advisers solve their problem of asset allocation towards direct property.
We’re currently in the process of seeking a Federal Court Declaration that DomaCom is exempt of the related party in sole purpose test provisions of the Superannuation Industry Supervision (SIS) Act. What this means practically is that should we achieve this ruling, investors can use their SMSF to co-invest with others and rent the property, or one of their children can. So it’ll be the game changer for Australia. And in fact as we all know, very topical at the moment is housing affordability, and we believe we’ve got a big role to play.
We’ve entered into several material agreements since we listed in November. The first key agreement was the approval by Lonsec of the DomaCom Fund, followed very quickly by the agreement with SuperConcepts. And then most recently, the agreement with DFS Portfolio Solutions, where they’re going to move $25 million into the DomaCom Fund, and our first market transaction with regards to a managed account provider, which is Benwest Investment Services Pty Ltd. And then last week we announced the world’s first property crowdfunding transaction has been executed. We bought a farm in Western Districts in Victoria, so it’s been a busy time for DomaCom.
The focus is very clear; it’s funds under management. The markets really want to see proof of life of our business model, so we’re heavily focused on just growing that funds under management. Then everything else will follow from that share price etc. So that’s really our short-term focus. Our long-term focus is that we believe that direct property will be a very large asset class, within most investors’ portfolios and we want to be one of the major providers of that. So we believe it’s an exciting time to be in this market.