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Acquisition of Waterfall node development rights and withdrawal of cautionary announcement
BALWIN PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/028851/06)
Share code: BWN
ISIN: ZAE000209532
("Balwin" or "the Company")
ACQUISITION OF WATERFALL NODE DEVELOPMENT RIGHTS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Introduction
Shareholders are referred to the cautionary announcement dated 16 October 2015 and the renewal of cautionary
announcement dated 25 November 2015, in terms of which shareholders were advised that Balwin is currently engaged
in negotiations for the acquisition of development rights in Johannesburg’s Kyalami / Waterfall node on which an
approximate 15,000 residential sectional title units may be developed.
The board of directors of Balwin is pleased to announce that pursuant to its negotiations, Balwin has concluded a non-
binding conditional agreement with Portimix Proprietary Limited (“Portimix”), in terms of which Balwin will acquire
development rights in Johannesburg’s Kyalami / Waterfall node, which development rights are anticipated to be
developed over an 8 – 10 year period commencing on 1 January 2017. The acquisition of the following development
rights from Portimix, the owner of the development rights, are not inter-conditional upon the acquisition of the other and
are subject to the conditions precedent set out below.
- Polo Fields, development rights for approximately 30.8 hectares (“Polo Fields”);
- Waterfall Fields, development rights for approximately 126.0 hectares (“Waterfall Fields”); and
- Waterfall Village, development rights for approximately 76.0 hectares (“Waterfall Village”).
(collectively the “Proposed Acquisition”).
Rationale for the Proposed Acquisition
Balwin is a specialist, niche, national large-scale, turnkey, sectional-title, residential property builder and developer
(typically between 500 – 1,000 sectional-title residential units per development) targeting high-density, high-growth
metropolitan areas in Johannesburg, Pretoria and Cape Town. One of the Company’s key strategic objectives is to
acquire / secure land to facilitate the roll-out of further large-scale sectional-title residential developments in its target
nodes.
The Proposed Acquisition will grow the Company’s secured development pipeline by in excess of approximately 6
years and will establish Balwin as the leading residential property builder and developer in the middle income market
segment within the Kyalami / Waterfall node. Balwin believes the node to be of strategic importance with a strong
demand for residential units within Balwin’s target price range due to, inter alia:
- ongoing plans to establish a central business district in direct proximity of the node (this has resulted in a
number of key corporates relocating to the node, the commencement of development of the Mall of Africa,
etc.);
- proximity of the node to the Sandton central business district, Fourways and Centurion and along Gauteng’s
main highway routes and the Gautrain; and
- current unavailability of secure, affordable, high-quality, environmentally friendly and conveniently located
sectional-title residential units appealing to middle income market segment within the node.
Conditions precedent to the Proposed Acquisition
The Proposed Acquisition is subject to the usual conditions precedent including, inter alia:
- the conclusion, subject to the approval of the board of directors of Balwin, of definitive transaction agreements
by no later than 31 March 2016;
- the approval by Portimix of Balwin’s master development plans for each of the development sites;
- to the extent required, the approval of the South African competition authorities;
- to the extent required, the approval of Balwin shareholders; and
- to the extent required, the completion of appropriate zoning and environmental consents.
Payment terms for the Proposed Acquisition
The consideration payable in respect of the Proposed Acquisition, which Balwin anticipates to fund out of internal cash
resources and third party borrowings, has been structured to permit for fixed payments together with ongoing payments
of 15% of the selling price of a unit on the date of transfer of said unit by Balwin. The proposed payment terms (excluding
Value Added Taxation) for the development rights comprising the Proposed Acquisition are set out in the table below.
Those payments set out alongside a set / fixed date reflect the “fixed” payments in respect of each of the development
rights, whilst the payments set out alongside a date range reflect the sum of the “ongoing” payments of 15% of the
selling price of a unit over the course of that time period. The total acquisition price for the developments rights are
capped at a maximum of the total acquisition prices as set in the table below:
Polo Fields development rights
Total acquisition price R 469,328,077
1 June 2016 R 80,000,000
from 1 June 2016 to 1 June 2018 a further R 86,400,000
from 1 June 2018 to 1 June 2019 a further R 93,312,000
from 1 June 2019 to 1 June 2020 a further R 100,776,960
from 1 June 2020 to 1 June 2021 a further R 108,839,117
Waterfall Fields development rights
Total acquisition price R 465,558,048
22 February 2017 R 30,000,000
1 November 2016 R 30,000,000
22 February 2017 R 30,000,000
from 22 February 2017 until 22 February 2018 a further R 35,308,000
from 22 February 2018 to 22 February 2019 a further R 38,132,640
from 22 February 2020 to 22 February 2021 a further R 44,477,911
from 22 February 2021 to 22 February 2022 a further R 48,036,144
from 22 February 2022 to 22 February 2023 a further R 51,879,036
from 22 February 2023 to 22 February 2024 a further R 56,029,359
from 22 February 2024 to 22 February 2025 a further R 60,511,707
Waterfall Village development rights
Total acquisition price R 565,658,997
release by City of Johannesburg R 20,000,000
from release to by 1 January 2019 no less than R 51,300,000
from 1 January 2019 to 1 January 2020 a further R 55,404,000
from 1 January 2020 to 1 January 2021 a further R 59,836,320
from 1 January 2021 to 1 January 2022 a further R 64,623,226
from 1 January 2022 to 1 January 2023 a further R 69,793,084
from 1 January 2023 to 1 January 2024 a further R 75,376,530
from 1 January 2024 to 1 January 2025 a further R 81,406,653
from 1 January 2025 to 1 January 2026 a further R 87,919,185
Valuation of the Waterfall development rights and anticipated attributable profits
The board of directors of Balwin is satisfied that the aggregate value of the development rights to be acquired pursuant
to the Proposed Acquisition are in line with the directors’ own assessment of the aggregate value of the development
rights acquired.
Balwin anticipates that the attributable profits to be generated over the course of the projected 8 – 10 year development
period will be in line with Balwin’s target gross profit margin as set out in the Company’s pre-listing statement dated 1
October 2015.
Categorisation of the Proposed Acquisition
In terms of the JSE Listings Requirements, the Proposed Acquisition is classified as a Category 1 transaction and will
require Balwin shareholder approval. Accordingly, a circular to shareholders will be posted in due course containing,
inter alia, a notice of general meeting.
Withdrawal of cautionary announcement
The finalisation of the definitive transaction agreements to reflect the content of the agreement between Balwin and
Portimix are in the process of being negotiated and shareholders will be advised of any further updates in the due
course of such negotiations. On account of the disclosures as set out herein, caution is no longer required to be
exercised by shareholders when dealing in Balwin’s securities.
14 December 2015
Johannesburg
Investment Bank and Sponsor
Investec Bank Limited
Date: 14/12/2015 01:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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