Big trouble for Joburg ‘beach’ developer

 ·20 May 2024

Property developer Balwin has seen its profits tank in 2024 despite critical acclaim for its take on lifestyle developments in South Africa.

The group is now moving to further position itself as a lifestyle brand in the country. It is looking to expand into semigration hotspots in coastal regions—especially the Western Cape—and even outside the country, such as Mauritius and other African locations.

Balwin, known for building Crystal Lagoons at its inland developments, bringing the “beach” to residents in Joburg and Tshwane, said it is leaning heavily into its lifestyle centres and sports branding going forward.

In the full year ended February 2024, the group reported a significant drop in revenue, 29% lower to R2.4 billion, with headline earnings dropping 47% to R223.9 million.

The group’s board resolved not to declare a dividend owing to the uncertain trading environment and it said available cash will be applied to reducing the group’s debt levels. It said it would reconsider declaring a dividend for the 2025 financial year.

Balwin CEO Stephen Brooks said that the group’s performance was reflective of the tough economic environment in South Africa, which has hit the property sector hard, given its sensitivity to interest rates especially.

“Our business is highly interest rate sensitive, and there has been no respite in borrowing costs, which were expected to start declining from the first half of the 2024 calendar year,” he said.

“The pressure on consumer spending from sustained high interest rates and above-inflationary living cost increases has translated into reduced demand for apartments, owing to the lack of affordability of loans.

“Consequently, the number of apartments recognised in revenue declined by 32% over last year, to 1,892 apartments. The largest sales decline was experienced in Gauteng, where revenue declined by 47%,” he said.

Brooks noted that Gauteng has traditionally been the group’s flagship region, but this year the province’s contribution reduced from 48% to 39% of total apartments handed over.

“However, we are optimistic on the long-term sustained demand within Gauteng, which is expected to gradually improve as the market recovers.”

FinancialsFY 2023FY 2024Change
Revenue (R’000)3 326 9082 356 284-29%
Headline Earnings (R’000)425 768223 873-47%
Operating profit (R’000)592 750330 814-44%
Basic earnings per share (cents)93.7446.18-51%
Headline Earnings per share (cents)91.4947.94-48%

From the beach to the court

In the meantime, Balwin has set out to differentiate itself in the market by leaning into its developments becoming “lifestyle” brands. This was already kicked off by its unique proposition of bringing the “beach” to inland residents through its partnership with Crystal Lagoons.

The Blyde development in Tshwane East was the first in South Africa to incorporate a lagoon built-in
a beach setting, with the second lagoon completed in 2023 at Munyaka Lifestyle Centre in Waterfall City.

The group is now also making a concerted effort to expand into other sports and lifestyle features, including the tennis/squash/badminton hybrid, padel.

Under the Balwin Sport branding, the group has hosted high-profile padel tournaments, including the highest cash prize amateur padel event held in Africa, as well as an international tournament, which included coaching clinics to upskill the local padel community.

In its integrated report for 2024, the group said that it will be expanding its lifestyle offering with the addition of padel courts at five of its developments, with plans to increase this over time.

The five padel courts will be built at Thaba Eco Estate to accommodate increased demand from residents and public, with the group noting that construction on indoor padel facilities within Munyaka, Waterfall City and Izinga Eco-Estate, KwaZulu-Natal are also in the pipeline.

Balwin Padel, a division of Balwin Properties, and Attacq Limited will also build six new rooftop padel courts at Mall of Africa in Waterfall City, Johannesburg.

The group plans to launch an e-commerce website to sell padel equipment, accessories and Balwin branded apparel in the current financial year.

“Plans for 2025 include expanding the Balwin padel facilities at strategic sites adjacent or close to developments and launching new padel tournaments around the country,” the group said.

Padel has become a fast-growing sport in South Africa, with hundreds of well-established courts nationwide, despite only landing in the country in 2020 and being virtually unknown before.

It is the fastest-growing sport globally, with over 25 million players in over 90 countries.

The first padel court arrived in South Africa in late 2020 when Action Padel SA built two courts in Cape Town.

More courts followed shortly after across South Africa – including in Johannesburg, KwaZulu Natal, the Western Cape and Eastern Cape.

While the sport has a similar scoring system to tennis, its plays, courts and racquets are very different. The courts are enclosed and gameplay allows for the ball to be played off them. The racquets, meanwhile, are solid and stringless.

Read: Padel is coming to the busiest mall in South Africa

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