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Voluntary Update: Use of Balwin’s Land Portfolio for Development of Balwin Estates for Rental
Balwin Properties Limited
(Incorporated in the Republic of South Africa)
Registration number 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
("Balwin", "the Company" or "the group")
VOLUNTARY UPDATE: USE OF BALWIN'S LAND PORTFOLIO FOR DEVELOPMENT OF BALWIN ESTATES FOR RENTAL
IN A MANNER THAT COMPLEMENTS ITS CORE BUILD-TO-SELL DEVELOPMENTS
Balwin Rentals Proprietary Limited ("Balwin Rentals"), a wholly owned subsidiary of Balwin,
is expanding its rental portfolio with a vision to develop up to 7 300 apartments for rental
over the next 8 to 10 years.
Rationale
At the time of listing, Balwin envisaged the strategic development and management of
a separate rental portfolio that would complement the group's core business.
Over the past few years, Balwin has steadily built capacity, skills, technology and systems
to be in a position to roll out a scalable, modern and efficient rental portfolio, without
detracting from the Company's existing build-to-sell model of approximately 2 000 to
3 000 sectional title apartments per annum, with the ability to scale up further, based on
market demand.
Moreover, the group intends to leverage its strong brand and position the rental portfolio
as an incubation hub to transition qualifying tenants to purchasing Balwin apartments.
The apartments/estates that are developed for rental will maintain the EDGE Advanced
certification that is synonymous with Balwin's build-to-sell model. The rental estates will be
developed exclusively for rental purposes, and none of the apartments will be available
for sale in the open market.
Balwin expects that the addition of a more defensive asset class will further diversify the
group's revenue streams and grow annuity income that will complement the cyclical
nature of its build-to-sell development business. Moreover, the group will benefit from the
improved usage of its unused land portfolio.
Land portfolio utilisation
Balwin has identified existing land parcels owned by the group for the first six build-to-rent
developments consisting of up to 7 300 apartments in aggregate. This represents
approximately 20% of the Company's current unused land portfolio. Existing land parcels
have been identified in Johannesburg east, Tshwane east and the Western Cape for the
rental model.
Structure and capital allocation
The rental portfolio will be housed within Balwin Rentals which is an existing wholly owned
subsidiary of Balwin.
Balwin Rentals envisages raising long-term debt finance from commercial lending and
Development Finance Institutions at preferential interest rates to fund the development.
As with Balwin's build-to-sell model, developments will be constructed and tenanted in
phases to minimise risk.
Asset and property management
Balwin Rentals will have full control over the rental estates, allowing Balwin to optimally
manage costs. The management of the rental portfolio will be internalised and as far as
possible, be tech-driven to reduce operating costs and enhance yield performance. The
Balwin team heading up Balwin Rentals have collectively managed rental portfolios
across different sectors and geographies for over 30 years.
The rental portfolio will target market rentals of between R6 000 and R13 000 per month
for one-, two- and three-bedroom apartments, while retaining quality and certain lifestyle
elements such as solar, high-speed fibre connectivity and facial recognition access
control.
These developments have been sufficiently cost-engineered to feasibly generate above
market related yields at the target monthly rentals. The revenue contribution from Balwin
Rentals will be negligible for the financial year to 28 February 2025, however, over time,
the group expects Balwin Rentals to increasingly contribute to the group's annuity
income and net asset value growth.
Job creation and skills retention
Preliminary studies show that the rollout of the rental portfolio will over time create
approximately 39 000 direct and indirect job opportunities.
Importantly, it will act as a catalyst for important construction skills retention, as
development will be on a similar rotational basis as with Balwin's build-to-sell model.
Shareholders will be updated on further developments within the rental portfolio as and
when appropriate.
Johannesburg
24 July 2024
Sponsor: Investec Bank Limited
Investor queries: Articulate Capital Partners – morne@articualtepartners.com
Date: 24-07-2024 08:00:00
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