FIFI PETERS: We are checking into the property sector now, where results [for the year to end-February 2022] out of Balwin Properties were released earlier today. The company develops and sells properties all over the country, and reported a 16% jump in annual revenue to R3.1 billion. In fact, this is the first time that revenue has broken the R3 billion mark. [The company] was founded some 26 years ago by the current CEO, Stephen Brookes, who joins the Market Update.
Steve, thanks so much for your time. Congratulations I suppose are in order for this milestone. Out of interest, has this come within your targets? Did it come ahead of expectations, or is it delayed?
STEVE BROOKES: Thank you very much. Very kind of you. Twenty-six years ago I would’ve never, ever dreamt that I could have got this company to this level. So I’m very proud [of the] total commitment from my fellow directors, management and all our contractors and suppliers that are out there, because obviously we have a lot of people working for us. It’s perfectly on schedule. As someone said today, watch out for the next target, which is R4 billion, then obviously R5 billion – and off we go. But yes, it is on schedule.
FIFI PETERS: All right. So in terms of the R4 billion and R5 billion, talk to us about timelines and what gets you there. I’m holding you accountable.
STEVE BROOKES: Now you’re putting me on the spot. Very cheeky of you, well done. Yeah, we’ll get there; we are very carefully watching the headwinds at the moment, which are obviously inflation and interest rates. So we’ll announce when we [see] growth in the company, and then we’ll put some timelines together which are clearer.
FIFI PETERS: It’s interesting that you say that this milestone that you’re talking about, revenue up over R3 billion, has come right on time, particularly when we look at some of the challenges that your sector – perhaps even the broader economy – faced in the lingering overhang of the Covid-19 pandemic which disrupted a whole lot of businesses and operations. So talk to us then about what got you to R3.1 billion in revenue. What drove revenue higher amid a challenging backdrop?
STEVE BROOKES: I think the brand Balwin is 26 years old, and people believe in the brand. We saw that by creating online sales in Covid. With the online platform we’ve got now, all our sales are online. We still have property professionals on site, but the basic concept of online selling was born out of Covid and we saw the power of the brand born – that people believe in it. They are prepared to buy online, almost without seeing the product. We are proud that we deliver exactly all higher expectations of the client demand.
And also all our greening – we really are advanced in our greening policy. I’m on the Green Building Council, and all our partners are ESG [environment , social and governance] certified, which makes a massive difference to consumers.
FIFI PETERS: Just the growth in online – it probably happened before the pandemic, but no doubt the pandemic boosted it – what does that mean about how you will be interacting with your customers in the foreseeable future? How important will the online marketing of your business be in the year ahead?
STEVE BROOKES: Online in line with technology is absolutely critical. We’ll continue with our online platform and tech. Tech is a very, very important part in this modern world and, as you know, every youngster has a cellphone and every single one of our customers is quite sharp when it comes to the internet and the like. So yes, we will continue with our online.
FIFI PETERS: We have had a lot of reporting around the property market and the challenges that it has undergone. It has been reportedly pretty tough. But talk to us about what you were seeing on the ground just based on the interaction of people coming through your physical, your virtual doors. Also to this, just perhaps help us understand where the main areas of interest are in the kind of properties that are receiving a lot more attention in your portfolio.
STEVE BROOKES: Well, we have fundamentally three brands: our green brand, our classic brand and our signature brand. So we’ve [positioned] those brands very, very carefully with the market and we are very, very clear in which areas those brands sit. That has made a huge difference to our business – identifying three different brands. And we are very proud of the fact that we’re striving for zero defects on our apartments. So there’s a real big drive that the customer gets a quality product; the customer is really discerning out there, so they really want that.
FIFI PETERS: In terms of the popularity of your different properties, is it the one-bedroom, is it the two, the three, the four? Which one is gathering the most attention?
STEVE BROOKES: It varies over time, but at the moment the one and two beds are in great demand. But we are also seeing a big resurgence for three beds, which is sort of contra-cyclical or contradictory to what we would see in the market. So at the moment it seems like all three of our properties, meaning one-, two- and three-bedroom [units] in all the different brands are selling well. So we’re quite pleased with the cross section we’ve got.
FIFI PETERS: Do you expect rising interest rates to put a dent in the current pace of sales? Are you worried about this rate-hiking cycle we’re in right now?
STEVE BROOKES: I’ve seen two rate hikes and we’ve managed to sell. It will get tougher. We also believe that our green policy is going be absolutely critical. We are already getting reductions in mortgage rates, because of our greening, from all the banks, and we are very proud of our of association with them. That will offset the rising interest rates.
FIFI PETERS: What are vacancies looking like?
STEVEN BROOKES: Well, one of our annuity businesses that we’ve started is a rental business, and our vacancy levels there are between 5% and 10%.
FIFI PETERS: And you’re comfortable with that?
STEVE BROOKES: Yeah. It’s a very small business. We only own a couple of hundred apartments. It’s very difficult to achieve 100%, very difficult.
FIFI PETERS: Well, the guys in the office space will tell you that, in fact, it’s pretty tough out there for them, and you’ve perhaps made it a little bit easier for them in the acquisition of the Melrose Arch property for Balwin, the Melrose Arch head office, as it were. Can you talk to us about that, because you did receive quite a lot of backlash from some investment corridors, given the price tag of this office space – some R125 million or so – [as to] whether it was justified and whether it was a good buy. Can you address the naysayers who were quite critical of this move of yours?
STEVE BROOKES: I must apologise to our shareholders. Our public relations should have been a lot better. We should have explained ourselves better. But fundamentally it’s a very small purchase in relation to our work in progress, which is sitting at about R5 billion at the moment. Also we’ve been looking at this building for five years. It hasn’t been a quick purchase.
The biggest upside of this building is the fact that it’s a massive market play. We’ve got one of the biggest digital screens in the country coming up, and we’re going to be earning an absolutely fantastic revenue from the digital marketing, and also the Balwin brand [which] we’ll put on the digital marketing, which is right by the M1 and Corlett Drive. That is the hotspot for marketing in the country.
FIFI PETERS: Okay, Steve, we’ll leave it there for now. Thank so much for your time, rightly justifying the purchase and where the potential return will come from. That was Steve Brookes, CEO of Balwin Properties.