DomaCom gets ASIC approval for mortgage bonds, enters into deal with US firm
Crowdfunding company DomaCom (ASX:DCL) has got regulatory approval to “deal in securities” and has also entered into an agreement with a US crowdfund that will expand the range of investment options for its clients.
The Australian Securities & Investments Commission has given approval to DomaCom to vary its Australian Financial Services Licence that would allow it to launch mortgage bond sub-funds and allow for investment loans in the DomaCom property portfolio.
Chief executive Arthur Naoumidis said the “varied AFS Licence will allow us to offer peer-to-peer mortgage bond sub-funds and a fractional investment model for corporate bonds with work well under way to issue a new Product Disclosure Statement (PDS) to support these new products”.
They will offer a yield of 3.54% over the RBA cash rate with the security of a first registered mortgage and a loan-to value ratio(LVR) of less than 50 per cent.
Mortgage bonds will usually have a fixed term of five years and the current expected return of 5.04% with the security of a first registered mortgage and low LVR is expected to be attractive to the SMSF market, it said.
“What DomaCom can achieve with mortgage and corporate bond products is to offer investors the opportunity to lock in yields that are more attractive than bank deposits, use the fractional model to allow them to invest with a minimum amount, and to have potential liquidity of trading using our liquidity facility,” said Naoumidis.
DomaCom has funded 39 property acquisitions — mainly residential — which it claims to be the largest number of book-builds by any crowdfunder in Australia.
Meanwhile, the company announced this week it has signed an exclusive distribution agreement with Prodigy Network, a leading real estate crowdfunding platform in the United States that has raised more than $410 million of equity from the crowd for their portfolio of assets, valued at US$750 million.
The agreement will pave the way for Australian investors and advisors to invest in prime commercial real estate assets located in Manhattan.
Naoumidis said the agreement would open up more overseas property crowdfunding opportunities for Australian investors.
“Whilst crowdfunding is still a relatively new phenomenon in Australia it is gaining significant ground overseas. There are over 125 such businesses globally with the 2015 transactions estimated to be around US$2.5 billion up from only US$20 million 4 years ago,” he said.
“Enormous buying power exists in our large industry and retail superannuation funds and our growing A$600 billion self-managed superannuation fund (SMSF) market. There are vast sums of money sitting there some of which must be looking for an opportunity to invest in global real estate markets”.
Prodigy Network formally initiated its track record in January 2016, by providing 23% yearly after tax returns to the investors that participated in a 95 unit extended stay property called AKA United Nations, located at 234 E 46th Street. This was the first crowd funded project in the history of New York.
Their success is explained by two main factors: 1) they both co-develop and co-invest in the deals they present to investors, 2) they have access to an extensive network of US and international mid-sized investors (capital raised from 26 US States and 29 different countries).
The investment platform and developer currently focuses primarily on investments in high-end collaborative workspaces and extended stay hotel developments in Manhattan.
“We think partnering with DomaCom makes a lot of sense given their strong reputation and scalable distribution network in APAC” said Leonard Chinchay, VP of client relations at Prodigy Network.
The deal was arranged by Tara Hill Capital in Sydney and Alpine Capital Advisors in New York.