Balwin's strategic rental model initiative to unlock value throughout the cycle

Posted On Wednesday, 05 December 2018 19:35 Published by
Rate this item
(0 votes)

Balwin Properties, the JSE’s only national large-scale developer of turnkey sectional-title apartments and surrounding infrastructure aimed at the mid- to upper market segment, today announced a strategic rental model initiative that will see it access its extensive land bank quicker and share in annuity rental and other income over the longer term. 

 BALWIN-RENTAL-MODEL-1

Balwin Chief Executive, Steve Brookes comments:

“Our ambition has always been to develop and retain a rental model that would ensure annuity income for the Company.

“We believe that the rental model initiative in its current form provides us with significant value-unlocking opportunities without any cashflow implications. We will continue with our current model of developing, selling and handing over developments in phases to mitigate risk.

“It is defensive, as rentals are more popular in a higher interest rate environment, whilst prospective clients opt to buy when interest rates are low. This allows us to not only perform through the cycle, but we anticipate that the annuity income derived from the rentals will smooth our cash flow in the longer term.

“We are also able to unlock our 12-year land bank much quicker, expediting revenue contribution from fibre-to-home and solar energy installations as we achieve critical mass.”

BALWIN-RENTAL-MODEL-2

In terms of the initial agreement, Balwin will dispose of a total of 156 units to Balwin Rentals Proprietary Limited (“the Rental Company”) for a total cash consideration of R98.43 million. The unadjusted profits after tax from the disposals of R18.54 million will be reinvested into Balwin’s existing development pipeline.

In addition, Balwin has subscribed for a 25% interest in the Rental Company at no cost, enabling it to share in 25% of the net rental income on an annuity basis.

“The rental units will retain Balwin’s quality and innovative design but are distinct from our build-to-sell models, both in architecture and specification levels.

“We expect that leases will range from R4 500 to R8 500 per month. Lifestyle elements such as Balwin’s clubhouse including a gym and restaurants will still form part of the rental developments,” added Brookes.

The disposal did not require shareholder approval and an independent expert has confirmed that the disposal is fair and reasonable in relation to Balwin’s shareholders.

Balwin expects to make further announcements with regards to the sale of additional rental developments in due course, as regulatory approvals are received.

Last modified on Wednesday, 05 December 2018 19:48

Most Popular

Balwin's Munyaka registers record R850 million in opening weekend sales, selling 555 apartments

Mar 09, 2020
Steve_Brookes_Balwin_Properties
JSE listed Balwin Properties, a developer that cares about environmentally responsible…

Balwin Properties and ABSA launch South Africa’s first green home loan

Mar 13, 2020
Apartment 71933
JSE-listed Balwin Properties Limited (Balwin Properties or the Company) and Absa Group…

Growthpoint reports a steady first half with its growth strategies paying dividends

Mar 11, 2020
Growthpoint Properties Group CEO Norbert Sassee
Growthpoint Properties (JSE: GRT) reported distributable income growth of 2.2% to R3.2bn,…

Spear REIT launches innovative self-isolation campaign for returning travellers in Cape Town, South Africa to combat COVID-19:

Mar 18, 2020
Double Tree Op
JSE listed Spear REIT Limited, the owner of the Double Tree by Hilton Cape Town, is the…

Precautions, planning and preparation - the real estate agent's guide to weathering the Covid19 storm

Mar 16, 2020
Corona
With the Corona Virus now in SA and beginning to cause widespread panic, we are not only…

Please publish modules in offcanvas position.