DomaCom Limited (ASX:DCL) CEO, Arthur Naoumidis discusses FY2018 highlights, including securing funding to allow investors to access debt to crowd fund properties.
Rachael Jones: Hello I’m Rachael Jones for the Finance News Network. Joining me today is CEO of DomaCom Limited (ASX:DCL), Arthur Naoumidis. Welcome back Arthur.
Arthur Naoumidis: Great to be back Rachael.
Rachael Jones: Can you tell us about the DomaCom business today?
Arthur Naoumidis: DomaCom is an online platform that allows investors to syndicate together to acquire properties generally, but very shortly, other assets as well. So we’ve had a very big last year. We’ve integrated with other platforms, such as Domain and also we’ve done our first transactions where the funds have come from online platforms, such as HUB24 Limited (ASX:HUB) and managedaccounts.com.au (ASX:MGP). And also recently, we’ve integrated with the financial planning powerhouse, XPLAN.
Rachael Jones: Now to the platform. Can you tell me more about the debt funding facility?
Arthur Naoumidis: We just recently announced a $100 million line of debt funding for property purchases. This has taken us three years. It’s been one of our major struggles over the years, to obtain debt to buy properties. But as most investors know, you don’t really buy property without debt generally. So that’s what really held us back. So we’re very excited to have this facility and it’s only the beginning, so this is the first facility. It’s from a Sydney based lending group and we now have more coming behind it.
So the first transactions are just currently being structured as well, so it’s quite an exciting time. But as I’ve told the market as well, we’re speaking to several banks and I’m hoping over the next month or two, that we’ll also have a couple of banks for more traditional resi as well.
Rachael Jones: What can you tell me about the transactions?
Arthur Naoumidis: DomaCom has transacted over 50 times, without debt and the first few debt-based transactions have just been structured. In fact, the first one was announced about six weeks ago, where an adviser syndicated both the equity and the debt, for the transaction. So syndicated the mortgage as well. So that’s the first, we’ve got a number of other transactions currently going in place. And hopefully, I’ll be able to disclose that to the market next month.
Rachael Jones: What can you tell me about the new investment category?
Arthur Naoumidis: DomaCom has extended now just from straight property acquisition. So now they can not only syndicate mortgages, but also syndicateother assets,such as New York property via a Prodigy partnership, very soon also other commercial loans etc. So other asset classes will be announced over the next few months. So it’s quite a great time for the business, because we can now really start to scale up our transactions.
Rachael Jones: Now to your new up and coming Senior Equity Release product?
Arthur Naoumidis: We’ve been working on this for five years with ASIC, trying to get the regulatory permissions through for our, in fact it’s a globally unique product. I’m pleased to say we’re nearly there. So hopefully in the next few weeks, we will receive our formal permissions, with regards to the relief instrument that we need to operate.
And over the next four/five months, we’ll be able to deliver a product to the market, which will have a lot of interest, in the financial planning community. Because it allows the advisers to basically help those clients, who are asset rich cash poor, to release equity from the house. But using other clients, who need investment in that asset class. So basically,it’s quite an exciting product. And fingers crossed, over the next month, we’ll be able to proceed to the construction phase.
Rachael Jones: Can you update us on your current court action with the ATO?
Arthur Naoumidis: This has also been going for a few years. We’ve clearly been trying to get a ruling that DomaCom is exempt of the related party and sole test provisions, of the Superannuation Act. It’s this Act, which means that if we were successful, SMSFs can invest in sub-funds that own properties and have a related party stay there. It’s really a major initiative by us. Our appeal was heard on May 23rd and so we’re just waiting now for the judgment, which we have no idea when it will be. I’m hoping it’ll be sometime over the next few months.
But one of the exciting things is that regardless of what happens, even if we lose, we expect to receive a detailed judgment, which shows the weakness of our documentation. So we will just simply amend our Constitution and do it again. So basically, this will enable investors to help themselves and their own families, using their own superannuation to get on the property ladder. So it’s a big positive initiative.
Rachael Jones: Now to your financials. Can you give us a snapshot and a look forward to 2019?
Arthur Naoumidis: The first is, as I mentioned at the beginning, DomaCom has been really hamstrung without being able to give debt. Now that we have, what the market will see, is our transaction volumes will increase substantially. In fact right now, we have $25 million worth of transactions being structured, of which $22 million are based on debt, have debt in it. And that shows you that for every one non-debt transaction, we’re having nine debt transactions. So that’s the key to looking forward, is that transaction volume should start increasing. That’s number one.
Number two is that we’ve already disclosed to the market that we’re also changing our funding model, a little bit. Because some of the transactions we’re doing are developments and a shorter term, so we’re including upfront fees. And similarly, over the next few weeks or months, the market will see some significant upfront cash flows for DomaCom. So this is really, I believe, the turning point that we’ve been waiting for for years.
Rachael Jones: Last question Arthur. What can investors look forward to in terms of news flow and for long-term ambition?
Arthur Naoumidis: Firstly, the news flow is just signally about growth or funds under management, and our cash flow. That’s where we’re signally focused, so that’s what they can look forward to. The other is really, in terms of the long-term ambition, is that just asking us to remember what DomaCom was all about. We’re an asset class play in an asset class, bigger than equities and Australians like property more than equities.
And so we’re positioned very well and particularly, the recent Royal Commission plays very well for DomaCom, because people are finding it harder to get debt in their own name. So they’ll be able to just go to DomaCom, select an asset, dial up the leverage and that’s it. No application forms, nothing. So we really expect the next year or two, to really be in the prime spot. So just bear in mind what the vision of what DomaCom was, we expect to deliver it.
Rachael Jones: Arthur Naoumidis, thanks for the update.
Arthur Naoumidis: Thank you Rachael, it’s been great to be here.