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DomaCom Australia takes commercialisation step further with equity release product

Snapshot

DomaCom launched an equity release product for Australian seniors in June that allows investors to buy part of their property.

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Quick facts: DomaCom Ltd

Price: 0.073 AUD

ASX:DCL
Market: ASX
Market Cap: $14.76 m
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  • DomaCom’s groundbreaking Senior Equity Release product will allow older Australians to stay in their homes while taking a cash share of its value

  • Investors can buy part-stakes in properties without having to leverage their investments

  • A Big Four bank has been trialling the company's fractional investing product, with results to follow

What does DomaCom do?

DomaCom Australia Ltd (ASX:DCL) is a fractional property investment platform service provider based in Australia. It is led by founder Arthur Naoumidis, a mathematician and computer scientist with more than 37 years experience in industry.

Naoumidis boasts 19 years experience leading companies and previously headed up an equities product division at BNP Paribas (EPA:BNP) (SWX:BNP) (FRA:MOEU) (OTCMKTS:BNPQY), was a retail services management at Goldman Sachs JBWere and a Senior business analyst at Bank of Melbourne. His IT consultancy career spanned more than two decades.

The experienced CEO has led DomaCom for the past nine years after a decade at the helm of another listed financial products company he founded, Praemium Ltd (ASX:PPS). Praemium is a portfolio business that targets its services at financial services professionals who run managed accounts.

What does DomaCom own?

DomaCom’s core asset is an investment platform that allows syndicated or crowdsourced investment in a property through sub-funds of a trust that owns an investment property.

The company’s latest product is a variation on the investment approach and allows investors to buy a proportion of a property being partly offered up by an Australian senior citizen looking to take a part-income from the home.

Launched in the first week of June 2019 and known as the Senior Equity Release product, the forerunning product has been in incubation for seven years and is viewed as a major achievement.

DomaCom’s Senior Equity Release (SER) product allows seniors to sell off part of their property, if an advisor signs off on the divestment.

The advisors must go through a qualification product to offer the service to their clients and are able to offer a fee for their services.

DomaCom’s SER investment opportunities may fill a void in the market for self-managed superannuation fund (SMSF) investors that have been affected by the major banks’ withdrawal from offering SMSF lending.

Rather than using SMSF cash holdings to help buy leveraged properties with the help of a less mainstream SMSF property investment lender, SMSF investors and trustees can instead buy a share of a senior’s home.

The investment would allow the senior to stay in the home while they are willing or able, then rent it out or sell it down the track or have their family do so when the time is right.

In exchange, DomaCom’s SER investor can take the equivalent of rent on their share of the property.

A 67-year-old woman with a $750,000 home, for example, could release up to $232,500 cash from her property, assuming a 3% forecasted capital growth rate.

Applying a 4.4% base service fee, DomaCom’s fund would then take $314,827.35 of equity in the property and hold $82,327.35 to cover costs over the following five years.

The company’s other longer running investment fund opportunities involve the group taking subscriptions to part ownership of an asset such as a cattle farm or townhouse.

DomaCom’s fractional investing product has been in testing with a Big Four bank during a six-month trial due to end this month.

Once prospective investors put up their hands to buy 100% of the assets, DomaCom buys the property and holds it in a trust.

Each investor or investment vehicle has sub-fund stakes in the property and can sell or liquidate them down the track as their interests change.

If they want to increase their stake in the asset, they can buy another investor’s stake in the property or all the stakes.

What is DomaCom’s capital base

DomaCom is a $14.5 million listed company that raised $1.5 million from professional and sophisticated investors last month.

The company has collected about $35 million from investors during its 7-year tenure and is moving toward a commercialisation phase from product development activities.

It is holding an extraordinary general meeting on August 19, 2019, to ratify its $1.5 million capital raising from high-quality investors in June 2019 and an earlier $1.315 million cap raise from high-quality investors in February 2019.

Inflection points

  • Uptake of Senior Equity Release product
  • Assessment of fractional investing product value by Big Four bank currently undertaking a trial
  • Financial advisors’ participation in SER qualification training and recommendations
  • Financial advisors’ recommendation of SER as an equity-release option to specific clients, if it is suitable or advisable for the client’s individual circumstances
  • Wider uptake of DomaCom’s proportionate or crowdsourced investment options
  • Financial milestones, commercialisation progress and significant transactions for the company
  • Continued financial backing of high-quality investors
  • SMSF and property market investment sentiment in Australia
  • Federal Government perspectives on the operation of the banking and the financial services industry
  • Inflation and banking industry models for access to finance
  • Changing perspectives on leveraging across the nation's financial services sectors

Founder Arthur Naoumidis explains crowdsourced investment approach

“It is pleasing to have received the support of existing and new shareholders at this pivotal time in our history and I now look forward to focusing on growing our business,” DomaCom founder and CEO Arthur Naoumidis said last month while noting the high-quality investor support that followed the launch of the company's Senior Equity Release product.

“After seven years and around $35 million in capital, the company has completed all product development and is now poised to commercialise the business.”

Naoumidis spoke to Proactive Investors about the company’s debut product offerings in April, saying “Our platform allows advisers and investors to select the property of their choice and then to syndicate, using an online process, the investment.

“They’ll syndicate the investment and then DomaCom acquires the asset using a fund structure.

“You’ll end up owning a share of the underlying sub-fund that owns the particular fund.

“It’s another form of crowfunding, it’s another word for it, but it’s really modern syndication using an internet-enabled platform.”

 

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