Balwin Properties, the JSE-listed sectional title developer, with a market capitalisation of R1.4bn, announced in April that it would buy a swanky office building in Melrose, Johannesburg and take residency there creating a new Balwin HQ.
It just so happens that property magnate Jonathan Beare is the seller.
Balwin’s founder and CEO Steve Brookes has had a close working relationship with the elusive and publicity shy billionaire for years. Beare was an early investor in the sectional title provider, which is now the largest in the country. In fact, he saved Brookes from bankruptcy more than once. Brookes’ family had run motor dealerships successfully but Beare helped him to profit from the real estate arena.
Balwin was founded in 1996 and then listed in 2015. Beare invested directly in Balwin through his company, Buffet Investments. He recognised the developer’s ability to grow across SA off the back of healthy residential sales. But it hasn’t been able to raise capital effectively enough.
The company has needed to attract more sophisticated and wealthier investors. It turns out that its deal with Beare has this goal in mind. Balwin wants to present a more exciting image but the transaction annoyed numerous investors who just couldn’t accept that the company was spending so much money on an office. The purchase consideration was a whopping R125m.
But Balwin argues that as the company looking to grow to being a mid-capitalisation stock and to attracting large institutional investors, it needs to enhance its image. Its main office in Johannesburg has been in Bedfordview for years but now it needs to move closer to institutions such as Stanlib which is based in Melrose as it tries to become a corporate animal.
Balwin wants to signal its intent to broaden its investor base as much as it can. In fact, according to some of its large investors, its board had planned for Brookes to step into a chairman role and for its former CFO Jonathan Weltman to replace him as CEO. But Weltman resigned in March, citing health reasons.
It’ll be interesting to see if new investors come on board for the sectional title kings during the rest of 2022 and in 2023. The company’s share price is down 21% year to date at R2.80 as of 15:15 on Tuesday May 10. World stock markets are having a turbulent time in the wake of the war in Ukraine and stagflation but many South African property stocks are doing their utmost to climb out of the worst of the pandemic which tore the world apart in 2020 and 2021.
Alistair Anderson