BALWIN Properties, the apartment estate developer, has managed to reduce the impact of higher interest rates on its clients by providing “green bonds” at its developments that cost less than traditional bonds.
Speaking after the release of the group’s results for the year to February 28, Balwin chief executive Steve Brookes said he was a firm believer in being environmentally conscious – his own home is off the Eskom grid and he drives a fully electric vehicle.
Brookes said the company was seeing increased demand for environmentally conscious living among the buyers at its estates.
He said they had seen a slight slowing in demand with the rise in interest rates. However, most banks were now in a position to provide green bonds at the company’s estates.
“In line with our ethos of putting clients first, we have leveraged our advancements in building green with the retail banks to negotiate preferential mortgage rates for clients,” he said.
All their apartments were EDGE (Excellence in Design for greater Efficiencies) certified, while 27 719 had been registered as EDGE Advanced since January 2021.
EDGE Advanced requires apartments to have an on-site energy saving of 40 percent or more, an improvement from the 20 percent savings required for basic EDGE certification, in addition to the 20 percent reduction in water usage and embodied energy in material that was previously an EDGE requirement.
He said that to date 4 367 green bonds had been secured for clients, with an estimated saving of R325 million over the average bond terms.
He said Balwin remained well positioned, despite increasing headwinds and a rising interest rate cycle, with 2 386 apartments forward sold and continued strong demand for their brand, supported by online sales.
Profit for the year increased by 18.1 percent to R397.2m, after revenue broke through the R3bn market for the first time. A final dividend of 13.4 cents per share (16.20 cents) was declared – the prior dividend included a previously deferred dividend that was withheld at the end of the 2020 financial year.
Operating profit for the year was up by 8 percent to R363.1m. Profitability was impacted by a once-off IFRS 2 charge of R34.1m relating to a black economic empowerment transaction. Excluding the impact of this once-off charge, profit for the year increased by 15 percent from the prior comparative period.
Significant increases in construction industry costs had dragged down the profit margin, but was mitigated through cost engineering, modifications to design and specifications and cost containment, supported by in-house procurement and loyal suppliers, he said.
The balance of material cost increases was offset by selling price increases. Net asset value increased 10 percent to 749 cents per share. The share price inched up 0.76 percent to R2.65. A R20m share buy-back programme would be launched immediately, he said.
“From a capital allocation point of view, considering the deep discount between the share price and Balwin’s net asset value, a share buy-back programme will be highly earnings accretive and will drive growth in headline earnings per share,” said Brookes.
Operating expenses increased to R301.6m at period-end, up 13.7 percent on the prior period, driven primarily by depreciation, sales commissions and sales activity-related costs.
He said they expected that the annuity businesses, which were still in their infancy and which would include Balwin Fibre, Balwin Energy, Balwin Education, Balwin Rental and Balwin Insurance, would become a bigger source of income for the group in the future.
The development pipeline stood at 51 803 apartments across 28 developments in key target nodes, representing a 15- to-20-year development horizon.
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