Rob Wesselo, the chief executive of Transcend, and Steve Brookes, the chief executive of Balwin. Transcend and Balwin have entered into a strategic alliance. Photo: Supplied
Rob Wesselo, the chief executive of Transcend, and Steve Brookes, the chief executive of Balwin. Transcend and Balwin have entered into a strategic alliance. Photo: Supplied
Rob Wesselo, the chief executive of Transcend, and Steve Brookes, the chief executive of Balwin. Transcend and Balwin have entered into a strategic alliance. Photo: Supplied
Rob Wesselo, the chief executive of Transcend, and Steve Brookes, the chief executive of Balwin. Transcend and Balwin have entered into a strategic alliance. Photo: Supplied
CAPE TOWN - The residential rental property market is set to receive a significant boost from a strategic alliance entered into between listed sectional title homes builder Balwin Properties and AltX-listed Transcend Residential Property Fund.

The alliance intends to deliver up to 8900 quality affordable rental apartments worth about R6.4 billion across five developments in key Gauteng nodes over the next six years.

Steve Brookes, the chief executive of Balwin Properties, confirmed yesterday that the alliance represented a definite shift in Balwin’s strategy since listing.

“This is our residential rental offering now in a guise that is different from when initially intended,” he said.

Balwin stated when it listed in October 2015 that it planned to develop, retain and manage a rental portfolio of between 2000 and 3000 units by 2020, which it believed would generate up to R3bn in revenue.

Brookes said there was synergy between Balwin and Transcend and a very good future.

“The future is in the lower rental market in South Africa. We’re going to shock the market because whenever one thinks of low cost rental housing, we think of an ugly development. Designed by Boogertman architects, it has been inspired by really good architecture and sustainable design,” he said.

Brookes said this new rental product supplemented Balwin’s existing build-to-sell business and they had put in place capacity to support the additional volumes above the about 3000 apartments they already delivered every year.

Rob Wesselo, the chief executive of Transcend, said the alliance was perfectly in line with their strategy to focus on a defensive asset class that delivered affordable housing rentals to a heavily under-serviced portion of the real estate market outside of conventional inner city residential rental housing.

Wesselo said rentals would be aligned with Transcend’s portfolio and were expected to range from R4000 to R8000, which was the sweet spot for a growing middle class in South Africa’s urban centres.

Transcend, a real estate investment trust created by private equity group International Housing Solutions (IHS), listed on AltX in December and currently has a portfolio of 12 properties comprising 2472 units located primarily in Gauteng but also in the Western Cape and Mpumalanga.

Wesselo said Transcend would have access to IHS stock for the next five to 10 years, but the key challenge was access to high-quality rental stock.

He said the alliance with Balwin was a strategic way for Transcend to tie itself to a developer with a good track record that it knew to secure a significant pipeline outside of IHS.

A memorandum of understanding containing details about the strategic alliance was signed by the two companies on Friday.

Balwin will be responsible for the design and construction of each development and sectional title apartment and securing lease agreements for the apartments with prospective tenants.

Transcend would then have the opportunity to purchase fully tenanted apartments in phases from Balwin.

Brookes said the five developments in the first phase of the strategic alliance with Transcend were Green Park in Boksburg, Green Lee in Linbro Park, Green Creek and Green Wood in Pretoria East and Green Hill next to Greenstone in Johannesburg.

-BUSINESS REPORT