Jessica: Hello. I’m Jessica Amir for the Finance News Network. Joining me from DomaCom is CEO Arthur Naoumidis. Arthur, welcome back.
Arthur: Hi, Jessica. Good to be back.
Jessica: So for those that aren’t familiar, DomaCom facilitates fractional property ownership. So can you tell us what it is and how it works?
Arthur: Yeah. So, it’s a platform that enables investors to pool together and acquire any property for sale in Australia, for the purposes of a long-term real estate investment. So, it’s very much like syndication, except in a modern form, using the internet to enable people to pool together.
Jessica: Now to some examples. Can you tell us what’s funded and what’s in the pipeline?
Arthur: Yeah. And, so far, we’ve transacted 43 times. Most of those properties are residential properties, all around Australia, we own properties in every state. New South Wales, Western Australia, South Australia, Queensland, and Tasmania. So, we also own our farm. Our first farm was bought out of Western District in Victoria, and we got a few more in the pipeline. We have a property in New South Wales, which is undergoing some division. So, we actually own a whole variety of properties. In terms of what’s coming, commercial properties. We’ve got more farms. We got the first couple of, what we call buyer energy plants, and also affordable housing, as well. So, there’s a lot coming.
Jessica: Sounds exciting. So how does one invest?
Arthur: People can invest, generally, through their financial planner or direct through DomaCom. And, so with their planner, it’s part of a normal asset allocation and property should be a part of it. That’s our belief. But also, some investors, you know, wanna invest directly in specific property opportunities.
Jessica: In terms of selling down our investment, how does one realize that?
Arthur: Well, DomaCom comes with three built-in liquidity mechanisms. The general one is that most sub-funds, which is what we create to house a property, have the term of five years. And at the end of five years, everyone votes to renew or not, and it must be 100%. So it’s an absolute liquidity guarantee. And that’s the first method. The second is, and that’s the unique feature of our fund, is that we have market make up permissions. And we have a liquidity facility that’s just like shares. So, effectively, people can buy their shares, or their units, in a sub-fund. Or sell them. So that’s the second liquidity mechanism. The third is investors can decide to wind up the sub-fund at anytime they wish.
Jessica: So a more general question, now, about crowdfunding. How big is the market?
Arthur: Well, it’s not that big in Australia. But, globally, it’s starting to really get scale. In terms of the statistics that we’ve been able to get, in the U.S., property crowdfunding started in about 2012 with about $20 million of transactions. And the last statistics we have is by about 2015, it was $2.5 billion. There are now about 300 property crowdfunding platforms in the U.S. And then, several dozen in the U.K. And about a dozen in Australia. So this is a global phenomena. And I’m pleased to say DomaCom is, you know, I believe the leader in Australia of what should be a very large, you know, market.
Jessica: And you’ve just launched two exciting crowdfunding campaigns. Can you tell us about these?
Arthur: Yes, I’m already excited to be part of two themes in Australia. One is affordable housing for retirees, and the other is bio energy for regional Australia.
So the first is a project in Cobram, Australia, which is to raise $6.3 million to build 143 retirement villas for retirees in what is an attractive area close to Melbourne. So from a thematic perspective, from a DomaCom perspective, it’s exciting because, as we all know, the population’s aging and the press, every day, is talking about affordable housing, and it’s good to be part of that. This is the first, of what we expect to be, several dozen of these around Australia.
The second is another exciting theme, which is to create a bio energy plant in Casino, northern New South Wales, which enables that town to create some energy independence. So, it enable investors to have a socially responsible investment and still make money, because both of these create a really attractive development return of 15% to 20%, per annum, which is exciting. But then, ongoing, they deliver an income yield, or gross rent, of about 8%. So, here, investors can make money and address their, you know, the socially responsible investment for affordable housing or energy independence for regional Australia.
Jessica: Turning the page now to financials, what are you targeting for FY18? And when does the business expect to be cash flow-positive?
Arthur: Well firstly, look, as a startup, it’s really hard to do forecasts. But I can tell you what our focus very heavily on is growing our fund under management. And really, part of that has been to address one of the key roadblocks that we’ve had, which is our inability to get debt within the sub-funds. We believe we have an answer to that, and all going well the next two months, we’ll be able to tell the market what the answer is. And we expect our funds under management, then, to grow rapidly after that. So, we’re focusing very heavily on funds under management. But, at the same time, we’ve got new products that are very close to delivering, in terms of senior equity release. And then, as well as that, we’ve got some other initiatives with regards to superannuation which we’re gonna talk about later.
Jessica: So just before we wrap up, what does the next 12 months look like in longer term?
Arthur: Well, it’s a very exciting 12 months for DomaCom, because this is the, you know, the next 12 months is when we actually deliver on our fund under management. But also, deliver on a couple of longstanding products, as I mentioned, the senior equity release product, which deals with another part of the market, which are the retirees who are running out of capital. So we believe it’s a very strong product, and we expect that in the next 12 months. And then, as well as the market knows, we’ve been trying to get a resolution from the federal court to confirm our belief that DomaCom is exempt of the related party in sole purpose test provisions of the Superannuation Act. This will, if we receive this approval from the federal court, enable investors to use their superannuation to get on the property ladder, which is, you know, really topical in Australia. So, we’ve got a very exciting 12 months, both from a fund under management perspective, but also, from a delivery of two key products. One is affordable housing for retirees and using our superannuation ruling, to enable the Gen X, Gen Y’s to get on the property ladder by using their super. And all of this will relate to revenue for DomaCom, because we charge 0.8% of the underlying properties. So, as we grow our fund, we’ll grow our revenue.
Jessica: Well, it’s all sounding incredibly exciting. Arthur Naoumidis, thank you so much for the update.
Arthur: Thank you, Jessica.