South African tycoon Stephen Brookes' Balwin to add 7,300 apartments to rental portfolio

Feyisayo Ajayi -

Key Point

  • Balwin Properties plans to build up to 7,300 rental apartments over the next 8-10 years, expanding its market presence.
  • The company aims to complement its core business of sectional title sales with a new rental portfolio via Balwin Rentals.
  • Despite recent financial setbacks, CEO Stephen Brookes remains confident, highlighting the rental expansion as a strategic growth move.

Balwin Properties, a Johannesburg-based residential developer led by South African real estate magnate Stephen Brookes, has announced a significant expansion into the rental market. The company aims to build up to 7,300 apartments over the next eight to ten years as part of its strategic shift.

Strategic shift to complement core business

The move, revealed in a Sens update on Wednesday, highlights Balwin’s ambition to capture a larger share of the residential property market. The company plans to complement its existing core business of selling sectional title units with this new rental initiative. The plan is to develop a substantial rental portfolio under its wholly-owned subsidiary, Balwin Rentals Proprietary.

Balwin recently acquired land for a planned R2 billion ($109 million) estate within KwaZulu-Natal’s Westown mega-development through a R133.7 million ($7 million) deal with private developers Fundamentum. This acquisition aligns with Balwin’s long-term vision to establish a separate rental segment alongside its build-to-sell operations.

CEO highlights benefits and goals

Stephen Brookes, CEO of Balwin Properties, expressed confidence in the new strategy. “We’ve built the capacity and expertise to roll out a scalable and efficient rental model without compromising our existing build-to-sell operations,” he said. The company currently constructs and sells 2,000 to 3,000 sectional title apartments annually and is prepared to adjust production based on market demand.

Brookes envisions the rental portfolio as a means to nurture potential buyers, allowing them to eventually transition to homeownership with Balwin apartments. He also emphasized that the rental initiative would expedite the utilization of Balwin’s land bank. “The first phase of 7,300 apartments represents approximately 20 percent of our land holdings,” Brookes explained. “This diversification introduces a more defensive asset class, generating additional revenue streams and complementing the cyclical nature of our build-to-sell development business.”

Financial performance faces challenges

Balwin’s recent financial performance has faced challenges. For the fiscal year ending February 2024, the company reported a 32 percent decrease in apartment sales, with 1,892 units sold compared to the previous year.

Revenue fell by 29.17 percent, reaching R2.36 billion ($130 million) from R3.33 billion ($183 million) in FY2023. Operating profit also dropped by 44.19 percent, amounting to R330.81 million ($18 million) compared to R592.75 million ($33 million) the prior year.

Despite these setbacks, Balwin Properties, known for its high-quality, environmentally friendly, and affordable apartments, remains a significant player in South Africa’s property development landscape. Founder Stephen Brookes continues to hold a 36.08-percent stake in the company, underscoring his pivotal role in its ongoing strategy and growth.