Balwin redevelops its rental plans


Balwin redevelops its rental plans

Published Date: 2018-12-06 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Balwin redevelops its rental plans

The property developer has already sold units to a new rental company for R98.4 million as it moves to protect its cash flows.

Balwin Properties has changed strategy on its pre-listing objective to develop and retain a portfolio of rental properties by 2020. Instead, due to the burden this would have on the group's immediate cash flow, it's taking a 25% stake in a new residential rental company that will buy its rental developments.

In an announcement yesterday, the property developer said the new rental model would mirror and complement its current build-to-sell model in the way that it's developed and sold in phases. The rental developments would be distinctly different from those it builds and sells, with units expected to be rented in the R4,500 to R8,500 range. They'll be sold to the rental company at a margin, which in turn will derive income from leasing the apartments. It said the rental model would create a hedge against rising interest rates as potential buyers may decide to rent instead in an upward interest-rate cycle. When rates are declining, it said it would benefit from offering sales and rentals.

Balwin's already agreed to sell 144 apartments in its Greenpark development and 12 units in its Amsterdam development to the Rental Company for R98.4 million. It has also identified other residential developments within Balwin's existing pipeline of land that it's keen to acquire. When it has sufficient scale, it plans to take a stock exchange listing. The rental company, was established by Yieldex Trading 2, which owns 75% of the issued share capital. Its underlying shareholders are Tremgrowth Pty Ltd. KLT Holdings, Malewell 2 and Yieldex Holdings. Balwin will get the remaining 25%.

Its shares closed unchanged at R3.10.

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