DomaCom adds to property crowd-funding mix

15-May-2015

By Elizabeth Somerville

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DomaCom is democratising the property market through a recent agreement with crowd-investing site EstateBaron to facilitate access to property for smaller investors.

Property crowd-sourcing companies were relatively new in the Australian market and did not have a legal structure to implement their crowd-funding once their pledge had reached fulfilment, DomaCom chief executive Arthur Naoumidis told financialobserver.

“None of them has done the heavy lifting that we’ve done [in regards to legal structures to allow retail investment], so all they do is create a private trust or a private company,” he said.

“Either way, you’re restricted to wholesale investors.”

Through the relationship with DomaCom, EstateBaron was able to leverage off the fraction property platform manager’s structure to implement once their pledge reached fulfilment, Naoumidis said.

“EstateBaron was struggling because they had investors - a crowd - wanting to invest in properties, but they were restricted to wholesale investors,” he said.

“[Now] when their pledge gets to fulfilment, they simply pass it on to an Australian financial services licensee (AFSL) and they do a book-build on DomaCom straight away, and they use our managed funds structure to implement.”

Naoumidis said it was likely that DomaCom would enter into similar future deals as even if crowd funding legislation was watered down, financial planners were not allowed to advise on private companies or trusts.

“EstateBaron can go in and say, ‘we’re crowd-funded, however, we’ve got a back end that is fully regulated, that has due diligence processes, that has everything else, and it’s retail from the get go.’, he said.

“All of [these property crowd-investing companies] are the same: they have a company or a private trust; we’re the only one that has a fully regulated managed fund as the back end.

“If we can do it for EstateBaron, we can do it for everyone.”

These partnerships gave DomaCom an additional distribution channel and democratised property developments to engage younger or smaller investors, Naoumidis said.

“Effectively, we’re bringing crowd-funding into the AFSL world,” he said.

“They’ve done their [funding] pledges, and they use that to do a book build.

“They get the benefit of a highly regulated structure, with professional indemnity insurance and everything else.”

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