Balwin Properties has announced a rental transaction in which the Balwin Rentals (Pty) Ltd. will retail a right of first refusal to acquire 4 544 rental apartments to be developed by the company.
Balwin Rentals (Pty) Ltd. has already exercised its right to acquire and the company has entered into a sale agreement for 96 residential rental apartments in the Greenpark development for a total consideration of R57 139 200.
“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” comments Steve Brookes, Balwin Chief Executive.
“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.”
In terms of the rental agreement, the 4 544 rental apartments will be sold in phases to Balwin Rentals (Pty) Ltd at an approximate 30% margin. Balwin will retain a 25% interest in Balwin Rentals (Pty) Ltd, providing the company with annuity income. Proceeds from the sale of these rental apartments will be reinvested into the existing development pipeline of Balwin.
The rental units will retain Balwin’s quality and innovative design but are distinct from the Company’s build-to-sell models, both in architecture and specification levels.
“Our award winning lifestyle centres are part of Balwin’s signature development and a key differentiator in our market. Tenants will enjoy these state of the art amenities which include clubhouses, swimming pools, gyms, laundromats, restaurants and concierge services” added Brookes.
Leases will range from R4 500.00 to R9 000.00 per month and provide tenants with access to unique lifestyle features associated with the Balwin brand, such as a clubhouse, restaurants, gym and concierge.
“Strong emphasis has been placed on reducing our carbon footprint and solar panels, gas geysers and other green initiatives such as water reticulation on the estate formed a key part of our objectives”.
“We worked very closely with the architects to develop a high-quality product that will disrupt the market in terms of rentals charged and yields achieved,” concluded Brookes.