Balwin Properties Ltd (BWN) is a JSE-listed homebuilder, focused on building large-scale sectional title residential estates across South Africa. Balwin typically targets the growing middle class in metropolitan areas and has been trading on the JSE since its listing on 15 October 2015. Yesterday, Baldwin released its Audited Provisional Results for the Year Ended 28 February 2017.
Balwin continues to profit from the current wave of demand for sectional title residential estate living. South Africans are looking for safe, well-built and conveniently located residential units at an affordable price, and with a reported 30% rise in revenue (to R2.7 billion from R2.08 billion the year before), Balwin appear to be well positioned to meet this demand.
Other highlights include:
What does the future hold?
During the reported period March 2016 to February 2017, Balwin were busy with 13 developments. A total of 2,711 apartments were completed and handed over, and an average selling price of R995,000 per unit was established. It is the stated ambition of Steve Brookes, CEO and founder of Balwin Properties, to continue to grow and expand the operating capacity of the developer. As far as a secured pipeline goes, it "...has been extended to 33,786 apartments to be rolled out over approximately ten years, which will sustain our future growth," Brookes said.
The last financial year marked the first development in Waterfall (named the Polo Fields) after successes in Pretoria, Johannesburg and Cape Town. And in this financial year, Balwin expects to begin work on their first development in KwaZulu-Natal. An office has been opened in Umhlanga and land acquired in Ballito for development, as the organisation deems entry into the housing market in the KwaZulu-Natal province as a key strategic milestone.
A photo of the Lifestyle Centre in Balwin’s estate, The Sandown, situated in Parklands, Cape Town
At listing, it was also the expressed intention of Balwin to build a portfolio of rental property over the years that would supplement the revenue stream of the business, and fully partake in the capital appreciation that has presented itself upon the maturing of a development in the past. Balwin is currently managing approximately 300 director-owned units under a pilot programme that seeks to provide an opportunity for streamlining processes and operations, as well as providing the necessary experience and skillset to employees, before initiating the new division officially this year.
Balwin’s rental portfolio is expected to grow to between 2,000 and 3,000 units by 2020 (with an estimated value of R2 billion to R3 billion). Management have indicated that they are open to the idea of spinning off the rental division in time if it unlocks shareholder value. The rental portfolio could then foreseeably be listed as a REIT on the JSE.
To date, the pilot project has experienced a first year net-income yield versus costs of between 12% and 15%. Healthy signs indeed for the rental division’s future prospects.
In the interim, Balwin’s core business of developments has already secured pre-sales for the 2018 financial year of 1,283 apartments. This equates to some 47% of last year’s numbers.
Investment Specialist at Discovery Invest
Mark graduated with a Business Science Degree from the University of Cape Town in 2007. He then joined Sharenet, during which time he also completed his B.Com Honours through UNISA. Mark has helped to build, launch and manage derivative and share trading brokerage businesses. He is also a JSE Registered Securities Trader, and has worked on the trading desk at Sharenet. After seven-and-a-half years at Sharenet Mark then moved to Reitway Global (a specialist Global Listed Property Fund Manager) where his passion for property was further kindled. Mark currently works for Discovery Invest as an Investment Specialist on their Investec Managed fund offering. He has over ten years of experience in the equity and asset management sector and can be reached at: firstname.lastname@example.org
The views and opinions (where expressed) in this article are those of the author and do not necessarily reflect the official policy or position of Discovery Invest.