JSE-listed Balwin Properties has announced plans to develop 7 300 rental apartments over the next eight to ten years, which marks the launch of its rental portfolio.

Currently, the company is implementing a build-to-sell model.

“Having a substantial rental portfolio will serve as an incubator, enabling tenants to progress up the property ladder by eventually buying their own Balwin apartment,” says CEO Steve Brookes, adding that a bigger rental portfolio will allow the company to unlock its landbank quicker.

The first phase of the 7 300 apartments represents about 20% of Balwin’s land bank.

“Balwin Rentals introduces a more defensive asset class that will further diversify our revenue streams and complement the cyclical nature of the build-to-sell development business,” Brookes explains.

The company has identified its first six land parcels for rental apartment developments in Johannesburg East, Tshwane East and the Western Cape. 

The rental portfolio will target market rentals of between R6 000 and R13 000 a month for one-, two- and three-bedroom apartments, while retaining quality and lifestyle elements such as solar power, high-speed fibre connectivity and facial recognition access control.

The rental development will also maintain the EDGE Advanced green building certification that characterises Balwin’s build-to-sell properties.

Although the group expects Balwin Rentals’ initial revenue contribution to be negligible for the financial year ending February 28, 2025, it will increasingly contribute to the group’s annuity income and net asset value growth over the medium term.

The company has cost-engineered the new development to feasibly generate above market-related yields, while full control over the rental estates once built will enable Balwin to optimally manage costs.

Balwin does not foresee the need for an aggressive headcount increase with the new portfolio, since the use of technology will help ensure efficient onboarding and collection of rental income.

The first six rental developments are expected to create about 39 000 direct and indirect job opportunities over the next eight to ten years.

The company intends to raise long-term debt finance from commercial lending and development finance institutions at preferential interest rates to fund the new developments.

As with Balwin’s build-to-sell model, developments will be built and tenanted in phases to minimise risk.