Johannesburg - Balwin Properties, the listed sectional title home builder, is committed to developing a rental portfolio of about 2 000 units by 2020 and separately listing this portfolio as a real estate investment trust (Reit).
Stephen Brookes, the chief executive and founder of Balwin, which listed on the JSE in October, confirmed this yesterday but indicated the timing of when it would commence with the development of rental units had not yet been decided.
But he said the company had the ability to accelerate some developments, such as River Walk in Pretoria, which comprised six estates of 1 000 units each.
Brookes said it could, for instance, develop one of these estates as rental units.
He said despite tough trading conditions, increasing interest rates and a challenging macroeconomic environment, demand for Balwin’s residential apartments remained robust and was being driven by increased urbanisation and the demand for affordable estate living.
Brookes said sales had dropped off slightly in the past two months, but not significantly, and would not affect the ability of the company to deliver on its financial results for the year to February 2017.
Sales drop
However, Brookes confirmed that the company could shift its focus more towards the rental market in a tough economic environment and if sales declined.
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Balwin Properties currently operates only in the Johannesburg, Pretoria and Cape Town market. Brookes said it had a geographic expansion plan and was looking at two future nodes, Durban and Nelspruit.
Brookes added that it had acquired the development rights to a portion of land in the Waterfall node in Midrand close to the Mall of Africa, on which a further 15 000 sectional title apartments could be developed and wanted to start executing on this deal.
Balwin Properties’ business strategy is underpinned by generating profits through the development and sale of large scale residential estates, which average in size between 500 and 1 000 units and offer buyers secure, affordable, high-quality and environmentally friendly one-, two- and three-bedroom apartments ranging in size from 45 square metres to 120m2.
In the year to February, the transfer of a record 2 087 units were registered compared with 1 655 in the previous year, while several first-phase developments that were launched during the period sold out within a few weeks of coming to market.
“We have a secured pipeline of over 16 000 homes, excluding the recently announced Waterfall transaction, and have increased developments under construction by 96 percent for the year,” he said.
Balwin Properties yesterday reported 68 percent growth in headline earnings a share to 131c in the year to February.
Jonathan Weltman, the company’s financial director, said profit after tax of R559 million exceeded the pre-listing forecast of R542m by R17m.
Revenue rose 54 percent to R2.1 billion from R1.4bn. Operating profit improved by 69 percent to R767.6m from R453.9m.
Balwin’s policy is to reinvest 70 percent of its after tax profits back into the business to support development growth, with the remaining 30 percent of profits distributed to shareholders. A final dividend of 21c a share was declared.
Shares in Balwin’s dropped 1.22 percent yesterday to close at R8.10.
BUSINESS REPORT