Balwin Properties CEO, Steve Brookes joins CNBC Africa’s Fifi Peters to unpack the details.
We're beginning with the property market now, quite a game-changing announcement, one could say, being announced by a property developer, J.C. Listed Property Group, that is Balwin, which has existed so far as being a property company that buys and sells properties. Now Balwin talking about a significant pivot in its business model to the rental market. We've got Steve Brookes, CEO at Balwin, for more on the story. Steve, thanks so much for your time. I mean, I looked at your stock and your stock is under pressure, just like quite a number of property accountants, so perhaps not exclusively a Balwin story here, but I imagine that you're going to tell me that the news that you have brought to market right now has been in the pipeline for some time. My question to you, sir, would be why now would be the greatest time, or why now was the greatest time for you to push this rental foray, as it were, out of your pipeline? You know, what we're seeing from all our customers, and thank you to all our clients, is there is a tremendous demand out there. Almost every second client that walks in the door wants to rent, because then they know they have a fixed amount of money they're spending on their accommodation. So we're seeing a huge demand for rental, and we believe that we should be in this space. It makes our property stock more defensible. You know, the theory obviously is logical. High interest rates, people rent. Low interest rates, people buy. And we also see it as a tremendous improvement in our land bank. This uses up about 20% of our land bank, which is fantastic, because now that land's sitting out there, we've been criticized for a large landholding. So we're looking at different ways to use that land, and obviously rental being a significant part. We also, I'm very outspoken about this, the history of this country. We need to get people into housing, into good quality housing. And even if it's rental, we want to be part of that journey in people's lives. And then we want to also use it as an incubation hub, where we can educate people in property ownership. And my dream is that eventually every South African has their own title, which leads to creation of wealth, creation of stability, and creation of longevity in people's lives. You are talking about the high interest rate environment, which is my question around timing. Because the expectation is that those rates are supposed to, you know, start coming down. And I know it has been the buyer's, or the seller's market, the buyer's market, as it were. But I just want to know, just given the relief that we do have on the cards, what do you reckon that that could mean for the fortunes of the rental market that you're going into? Yeah, look, our sales have been resilient, even through the high interest rate cycle. We believe this is an alternative way of owning property. And we really do believe in rental. We've always run rentals. And we've had a small portfolio. We've upskilled our staff, our staff now to handle the declines in the rental market. So even though interest rates are dropping, we still believe there is a very, very good part of the market to be in. Ultimately, what does this mean for the shareholder model, Steve, and what your investors have been used to by way of your performance? I mean, are you forecasting better days ahead as a result of the slight step change you're taking? Yeah, you know, born as the share price has been under pressure, you know, we've worked hard to improve that. We believe we will come out of this tough time. And we, you know, we've always been a very strong dividend play. We didn't declare dividends this year. But you know, the future is looking better. And we hope to give some value to our shareholders. In terms of capital expenditure, to give impetus to the strategy, will any more money be forthcoming from you? And if so, how much? No, we the land we own already. And you know, we've got some excellent relationships with all our financiers, the banks, they really are good to us. And we think we can do it with very, very minimal capital. If we just speak broadly about your sentiments on the environment right now, Steve, just given the formation of the government of national unity and a bit of political stability, that some say has been infused into the economy. Does that make you feel better about the prospects for the industry going forward if we finally do start to get that much needed growth coming into South Africa's economy? You know, I'm a very, very proud South African. A little bit outspoken about how proud I am of this country. I believe in our president, I believe what he's done has been absolutely unbelievable. You know, I've had the good fortune of meeting one or two of our ministers after the elections. Their attitude is unbelievable. They want to work, they want to get things done. And it gives someone an entrepreneur like me tremendous faith in this economy. I believe in this country. I think it's a fantastic country. We must all learn to work together and forgive the sins of the past and move forward. I think that that is the desire, that is the hope of most South Africans. But a lot of us, our memories are still quite sharp. And we know where we're coming from right now. Is a question then, Steve, regarding the major risks that you do see or any concerns, if at all, that you have around this GNU and ultimately what it could mean for your business? Yeah, I think the GNU will survive. I hope it will. I'm not a politician. But, you know, I've begged, pleaded and asked, please spend money on infrastructure. Either do new infrastructure or maintain and fix the older infrastructure, because that is the future of this country. If we get the infrastructure right, development grows, job creation, and off we go again. So that is my big message. If I can be so bold to all the politicians that lead this country, get going with infrastructure. And obviously, another part which I'm not involved in is education. Please educate this country well. So your statement is talking about the development of around 7,300 properties in the next eight to 10 years. I'd just like to understand if that is set in stone or depending on how well things go in this market, that could be a little bit of a moving target. Yeah, definitely it's a moving target. You know, I don't think in modern business, in the modern world, you can set anything in stone. You have to be nimble. You have to be wide awake. But, you know, we've got to put projections down on paper and put forecasts down. And depending on the uptake, depending on market conditions, I think we will stick to that. But we have to be nimble and adapt as things adapt. All right. Steve, we'll leave it there. So thanks so much for your time and bringing us this story about a slight change in the business model for the Group. Steve Brooks, he's a CEO over at Baldwin.
Theme: Balwin Properties transitions to the rental market to meet rising consumer demand and enhance its property portfolio.
Balwin Properties, a well-known property developer listed on the Johannesburg Stock Exchange, has made a significant announcement that has caught the attention of investors and industry experts alike. The company, traditionally known for buying and selling properties, is now venturing into the built-to-rent market. This strategic pivot marks a new chapter in Balwin's journey, aiming to cater to the evolving demands of the real estate sector. CEO Steve Brookes shed light on this transformative decision during a recent interview with CNBC Africa's Fifi Peters. Brookes highlighted the growing demand for rental properties among consumers. He emphasized that many clients are opting to rent due to the certainty it provides in terms of fixed expenses. Balwin's entry into the rental market not only aligns with this trend but also strengthens the company's property portfolio. By utilizing a portion of its land bank for rental developments, Balwin aims to address housing needs, promote property ownership, and contribute to long-term wealth creation for South Africans. Responding to queries about the timing of this strategic shift, Brookes acknowledged the prevailing high-interest rate environment. However, he expressed confidence in the rental market's resilience, emphasizing that rental properties offer an alternative path to property ownership. Despite anticipated interest rate reductions, Balwin remains optimistic about the opportunities in the rental sector. In terms of financial performance and shareholder expectations, Brookes assured investors of better prospects ahead. While the company's stock has faced pressure, Balwin is focused on delivering value and potential dividends to its shareholders. Brookes underscored the minimal capital requirements for the rental strategy, leveraging existing land holdings and strong partnerships with financiers. The conversation also touched upon broader economic factors, including political stability and infrastructure development. Brookes commended South Africa's government and expressed optimism about the collaborative efforts to drive economic growth. He emphasized the importance of infrastructure investments for sustainable development and job creation. Additionally, Brookes highlighted the significance of education in shaping a prosperous future for the country. Looking ahead, Balwin envisions developing approximately 7,300 rental properties over the next eight to ten years. While these targets are subject to market dynamics and consumer demand, the company remains agile and adaptable in its approach. Brookes emphasized the need for flexibility in a rapidly evolving business landscape, demonstrating Balwin's commitment to innovation and growth. In conclusion, Balwin Properties' strategic shift towards the rental market reflects a forward-thinking approach to meet the changing needs of consumers and drive long-term value creation. With a vision to contribute to housing accessibility and property education, Balwin aims to play a significant role in South Africa's real estate landscape.
"We've got to put projections down on paper and put forecasts down. And depending on the uptake, depending on market conditions, I think we will stick to that. But we have to be nimble and adapt as things adapt."
['Balwin Properties', 'rental market', 'property development', 'real estate sector', 'South Africa', 'housing market']