Housing development company Balwin Properties’ performance for the financial year ending February 28 was largely impacted on by delays in construction at its five latest developments.

The delays were owing to delayed town planning, zoning of land and local authority approval of the developments, which include The Whisken, in Kyalami, Gauteng; The Blyde, in Pretoria East, Gauteng; Ballito Hills, in Ballito, KwaZulu-Natal; The Jade, in Somerset West, in the Western Cape; and Green Park, in Boksburg, Gauteng.  

Ballito Hills is Balwin’s maiden development in KwaZulu-Natal; and the Blyde will be the first development in Southern Africa to feature a crystal lagoon – a water amenity that brings a beach look and feel to the city.

The delays affected 696 apartments, which will now only reflect in the sales for the 2019 financial year.

Nevertheless, Balwin stated that 2 084 apartments were handed over and recognised as revenue in the period, compared with 2 711 in the prior financial year.

This also remained within Balwin’s targeted handover of 2 000 to 3 000 apartments a year.

“We saw strong demand for our apartments, especially at the new developments. Had the delays not been experienced, we would have handed over close to 2 800 apartments, which is at the upper end of our yearly target,” said CEO Steve Brookes.

He added that all five new developments have received approval to begin construction just after the financial year-end and a number of the first phases are due to be handed over soon.

“To avoid such delays in future, we are committed to buying zoned land where possible,” Brookes pointed out.

The higher number of new developments launched and handed over during the period resulted in a reduction in gross profit margin to 33%, compared with 37% in the 2017 financial year.

Balwin’s revenue decreased by 9% year-on-year to R2.5-billion, while profits decreased by 26% to R491-million. Earnings a share and headline earnings a share fell by 26% year-on-year to 104c, compared with 140c in the prior financial year.

Dividends decreased by 32% year-on-year but net asset value increased by 15% year-on-year.

In terms of housing demand, Brookes noted that two- and three-bedroom apartment demand had slowed over the past year, while demand for one-bedroom apartments had increased. Balwin has, therefore, adapted the apartment block configuration of its new developments to include a newly designed one-bedroom apartment.

“This results in more one- and two-bedroom apartments per block, more apartment types to choose from and lower entry price points. Since introducing this new design, we have seen a positive response from the market,” he said.

To further meet customer needs, Balwin introduced solar energy to its developments and fibre through its newly established subsidiary Balwin Fibre.

“All future developments will have fibre and solar energy as a standard offering and we continually enhance our lifestyle centres which are a unique selling proposition for us,” Brookes commented.

The main focus for the next financial year is on operational performance and execution across all developments, especially during the initial phases.

Balwin has already pre-sold 1 328 apartments for the 2019 financial year. 

“We are expecting growth in sales going forward, owing to improving consumer sentiment following the change in the country’s political leadership, together with declining interest rates and the lower inflation environment,” Brookes noted.

Moreover, Balwin management is focusing on delivering on its rental model through strategic alliances. Brookes elaborated that the company has developed a model called Green, of which the Green Park development is the first of this kind, which Balwin is undertaking with Boogertman + Partners Architects.

“We are not keeping the developments, we will sell it and, so far, three players in the industry are interested in buying Green Park.

We are concluding legal processes and will announce the [sale] in a month’s time,” said Brookes.  

Balwin builds and tenants the Green developments, after which the properties are available for buying. “This will take lumpiness out of Balwin’s earnings,” Brookes concluded.