Balwin Properties concludes 4,500 apartment deal for its rentals business
Balwin Properties, the largest sectional title developer in SA, has concluded its first rental apartment deal with a partner as it looks to diversify its income stream.
The company, which owns 25% of partner Balwin Rentals, previously only sold units it developed.
In terms of the deal, Balwin Rentals retains a right of first refusal to acquire 4,544 rental apartments to be developed by Balwin Properties.
Balwin Rentals has already exercised its right to acquire and entered into a sale agreement for 96 residential rental apartments in the Greenpark development for a total consideration of R57.1392m.
The 4,544 units are spread across Greenpark in Boksburg, Greenlee in Linbro, and Greencreek in Pretoria East.
CEO of Balwin Properties Steve Brookes said a rental business will help generate cash flow and annuity income for Balwin.
“Our ambition has always been to develop and retain a rental model that will ensure annuity income for the company,” he said.
“We believe that the rental model initiative in its current form provides us with significant value-unlocking opportunities without any cash flow implications. We will continue with our current model of developing, selling and handing over developments in phases to mitigate risk.”
Evan Robins, a fund manager at Old Mutual Investment Group, said the new business could help Balwin in a tough economic environment, as more people tend to rent under these conditions.
Brookes said rentals are more popular in a higher interest rate environment. “This is while 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.”