DomaCom (ASX:DCL) expands distribution & partnerships


by Jessica Amir

DomaCom Limited (ASX:DCL) CEO Arthur Naoumidis discusses the company’s expanding distribution, regulatory environment and priorities for 2018.

Jessica Amir: Hi. I'm Jessica Amir for the Finance News Network. Joining me now from DomaCom is CEO Arthur Naoumidis. Hi Arthur. Welcome back.

Arthur Naoumidis: Hi Jessica. Good to be back here again.

Jessica Amir: Starting off with, Arthur, just tell us about the company and give us a quick update.

Arthur Naoumidis: DomaCom operates a platform that enables investors and advisors to pull together or syndicate or crowdfund individual investment properties to begin with, but shortly other assets including mortgages. And so the last few years have been the formative years. We've now transacted 48 times. We own 48 properties around Australia in every State. Most of those properties are residential, however we've acquired our first cattle farm in the western district of Victoria last year, and we're just about to acquire our first land banking project, right near Badgerys Creek, which is an $8 million transaction. So the transactions are starting to gain pace and the size is starting to increase. So it's been formative years.

Jessica Amir: And you've been very busy putting out announcements to the market about your distribution and partnerships. Just tell us what's happening in this space.

Arthur Naoumidis: Yes. We've had three major announcements over the last few months. I know it sounds like it's all happened in three months, but it's actually been several years in the making. And the first announcement really was our deal with XPLAN, which is owned by IRESS. As most financial advisors in Australia know, XPLAN is the leading CRM, or financial planning tool, for financial advisors. And what this'll do is just make it far easier for advisors to be able to use DomaCom and integrate it into their financial planning statement of advice and reporting. So, like all humans, we like to do the easy thing, so this'll make it easier for advisors to use us.

That was the first one. The second announcement was our integration of the Domain listing data. What this will enable both clients and advisors is to go onto DomaCom and select any property available for sale in Australia and commence a crowdfunding campaign or a syndication process with their friends and family or with their clients. So it's a very powerful tool, and it's been a long time coming, and it'll benefit Domain as well.

And finally, the third announcement was the approval by Trustee Partners of DomaCom, which is really the first in Australia of a superannuation trustee that enables fractional property investing to occur within their fund. So over the next few months we'll be looking to integrate DomaCom within some retail superfunds, which will give options to those people who don't have self-managed super to invest in fractional property.

Jessica Amir: And just tell us about the recent Federal Court SMSF ruling and how it affects you guys.

Arthur Naoumidis: What we've been trying to do for the last several years is see whether superannuation funds can invest in DomaCom subfunds that are in a property and then have a related party of the superfund rent that property. Unfortunately, we weren't successful in the Federal Court hearing in December, and so, after some consideration, we've decided to lodge an appeal, which was lodged on 25th January. So we expect to hear the result sometime mid-year, and we'll see what happens. But, clearly, it will be a major result if we are successful.

Jessica Amir: And you made some recent announcements about your capital. Can you just update the market about those transactions?

Arthur Naoumidis: As most people were aware, we've really had to do something about our capital recently. So, what we've done is two forms of convertible notes to top up our capital base. In addition, we've also reduced our operating cost base. So firstly, we've got a million dollar convertible note from the US, and then we're got another $650,000 three-year convertible note from Australian investors. And so that combined with our reduction of cost base, which is everything from reducing operating costs to some staff reductions, basically puts DomaCom in a stronger position for this year. We also have other sources of capital with regards to the ATO rebate that I announced. So, yeah, we're in a stronger position than we were five or six months ago.

Jessica Amir: Looking forward, Arthur, what can investors expect over the coming months and longer term?

Arthur Naoumidis: This last year, we've been trying to really solve one of our major problems that we've had in DomaCom that's been inhibiting our growth. And that is, we haven't been able to get debt inside the subfunds. Most investors, when they buy investment properties, have a bit of debt, because it makes it tax-efficient. Unfortunately, we haven't been able to find a lender that would be willing to lend to DomaCom, and we've addressed that issue by changing the trustee at the end of last year.

So we're now negotiating with a major bank, or in fact several major banks, to provide a default loan facility within DomaCom. We're also enabling our advisors to crowdfund their own mortgages, to fund the debt within the DomaCom platform. And so what we expect to happen is that the number of transactions will accelerate this year. So, frankly, we've transacted 48 times last year without debt. So the question is: How many transactions do you think we can do with debt? And we expect to do a lot more. So we're going to work very hard to deliver what the market's really looking for with DomaCom, which is runs on the board, funds under management. So that's really our focus this year.

Jessica Amir: Well, very exciting times. Arthur Naoumidis, thank you so much for the update.

Arthur Naoumidis: Thank you, Jessica. Good to be here.