Balwin on track to deliver 5,200 apartments despite Covid-19
But sectional title developer joins its peers in passing dividend so it can strengthen its cash position
SA’s largest sectional title developer, Balwin Properties, is on track to deliver 5,200 apartments in Waterfall, Midrand, in a project worth R9bn despite the lockdown.
SA has been on lockdown over the past eight weeks, aimed at curbing the spread of the coronavirus. Only industries providing essential services were allowed to operate, while others are slowly opening for business.
Balwin CEO Steve Brookes said that while construction of its residential development had been halted for nearly two months, this would have only a temporary effect on the company.
“While we haven’t been able to operate as normal in lockdown, our project pipeline is well on track. In fact, we are ahead of schedule in terms of our mega Munyaka development in the exciting Waterfall node,” he said after the release of the company’s financial results for the year ended February.
Balwin began planning the Munyaka residential estate in Waterfall in 2016. It will contain about 5,200 units, a hotel and the largest man-made “Crystal Lagoon” water feature in the southern hemisphere, expected to be the size of about seven rugby fields, with a sky bar 50m up and a water slide. The project is expected to be finalised before 2030.
Brookes said Balwin’s core staff had been operating remotely, while the company had also managed to sell as many as 200 apartments using its online platforms during the lockdown. Before then, it used to sell 300 units a month on average. The company’s total pipeline sat at nearly 29,500 units countrywide.
Balwin reported an 11% rise in revenue for the year to February to R2.9bn, while its earnings per share declined 8% to 88c. The company has joined a host of its peers in holding on to its dividend due to Covid-19, also reporting that profits are already under some pressure due to SA’s weak economy. The group increased marketing to push sales in a constrained environment but its profits fell 9% to R411m.
Independent analyst Anthony Clark said Balwin had greatly improved its cash retention measures, adding that it had delivered a commendable set of results.
“I think the deferral of the dividend is a sensible move. Most property companies are cutting their dividends or deferring them to try to preserve cash. Balwin has spent 12 to 18 months to improve its cash preservation, which is welcome,” he said. Balwin’s cash on hand improved by nearly 40% to R476m in the reporting period.
But Clark said the 2021 financial year could be very challenging for Balwin if a large portion of its tenants were unable to pay rent. This was why its cash position was so important. He said the market still saw Balwin as a property company operating in a sector of the residential market, which would come under pressure from the weak economy and the economic lockdown.
“With an uncertain landscape regarding employment in the country going forward, one must wonder how badly hit the affordable and emerging housing markets will be hit. Balwin is financially secure and is doing all it can to protect its shareholders, but they are right to be apprehensive and to delay income payouts,” Clark said.
With Karl Gernetzky