July 24 2024 13:30

Steve Brookes
SA’s largest sectional title estate developer, Balwin Properties, said on Wednesday that it planned to expand its rental portfolio and develop up to 7,300 apartments for the rental market over the next eight to 10 years.
Balwin was formed in 1996. It had found it especially challenging to sell units in the estates it has developed around the country, in recent years. This is as interest rates are high and potential investors battle with affordability. Balwin is now trying to embrace the rental market more thought its subsidiary, Balwin Rentals.
The Balwin group said in a voluntary update via the JSE’s stock exchange news service (SENS) that it identified existing land parcels owned by the group for the first six build-to-rent developments consisting of up to 7,300 apartments, This represented about a fifth of the company’s current unused land portfolio.
Land parcels were identified in Johannesburg east, Tshwane east and the Western Cape for the rental model. The rollout of the rental portfolio through Balwin Rentals aims to 39,000 direct and indirect job opportunities.
At the time of listing, Balwin envisaged the development and management of a separate rental portfolio that would complement the group’s core business, according to group CEO Steve Brookes.
The build-to-sell model creates between 2,000 and3,000 sectional title apartments a year, with the ability to scale up further, based on market demand, Balwin said.
Balwin expects the addition of a more defensive rental asset class to diversify its revenue streams and grow annuity income that will complement the cyclical nature of its build-to-sell development business.
Balwin Rentals envisages raising long-term debt finance from commercial lending and development finance institutions at preferential interest rates to fund the development.
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 lifestyle elements such as solar, high-speed fibre connectivity and facial recognition access control.
The revenue contribution will be negligible for the 2025 financial year, but over time the group expects Balwin Rentals to increasingly contribute to the group’s annuity income and net asset value growth.
In May, Bakwin reported that its profit for the year ended February declined 50% to R217.4m, while headline earnings per share fell 48% to 47.94c. Revenue was down 29% to R2.4bn with 1,892 apartments recognised in revenue, a 32% reduction from the prior year reflecting the challenging conditions in the residential housing market.
The Western Cape overtook Gauteng as the group’s main revenue contributor as income from Gauteng fell nearly 50% in the year to-end February. Balwin’s share price fell 2.15% to R1.82 soon after the news of its rental rollout was announced. Year to date, the group’s share price is down 14%. However, in the past 90 days, its price has climbed 8% as the group’s benefits from confidence around SA’s new government of national unity and hopes of interest rates coming down from November.
alistair@propertyflash.co.za