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DomaCom revealed in a disclosure to the Australian Securities Exchange that La Trobe Financial has provided a $50 million credit facility that will allow property investors to acquire $100 million of residential, commercial and industrial leveraged property through DomaCom’s fractional property investment fund (DomaCom Fund).
The company had last year obtained a lending line to the tune of $100 million from a consortium of institutional private lenders.
The new facility will provide up to 60 per cent leverage for investors and self-managed super funds (SMSFs) at 5.99 per cent p.a., the company reported.
DomaCom believes it is now well-positioned to “almost triple” funds under management growth to $150 million through leveraged property investment.
The company’s CEO, Arthur Naoumidis, said in a statement: “We’re delighted to have the final piece of the jigsaw in place for DomaCom. We have bought over 50 properties to date where almost all are without debt, and we are excited to be able to offer advisers ready access to competitive SMSF lending.
“The availability of this initial $50 million debt facility has cleared the remaining obstacle for DomaCom. After many patient years, we are now well placed to take our platform to financial advisers and the SMSF sector, with available debt and legal certainty.”
La Trobe’s chief investment officer, Chris Andrews, said: “We are happy to partner with DomaCom to assist borrowers obtain that much needed SMSF finance for property investment purposes. With more than one million Australians having turned to taking more control of their own super, the growth of the SMSF sector continues.”
According to Mr Andrews, SMSF assets grew by $319.7 billion or 55 per cent in the five years to the end of December 2018 to $726.46 billion in assets under management.
As such, he said he expects the SMSF sector – which comprises more than 587,000 funds – to continue playing an important role in asset allocation debates in the retirement industry, as the majority of SMSFs are formed by self-employed business people.
“They have a bias towards asset classes with low volatility and assets that have longer term (10-plus year) investment horizons, and to this end, property is eminently recognisable and understandable for SMSF investors,” Mr Andrews said.
“Currently, there is only $42.85 billion of limited recourse borrowings (5.9 per cent of total SMSF assets).”
The announcement follows a wave of withdrawals from the residential SMSF market in recent months by lenders such as CBA, NAB, Westpac, AMP, and Macquarie.
It also follows the release of the Council of Financial Regulators’ and the Australian Taxation Office’s report on SMSF lending, which concluded that limited recourse borrowing arrangements (LRBAs) held by SMSFs are “unlikely to pose systemic risks”.
The federal government, as such, said it would not make any changes to LRBAs held by SMSFs. However, the opposition party committed to banning SMSF LRBAs if elected, a move that the Financial System Inquiry recommended in 2014.