South Africa’s largest sectional-title residential developer JSE-listed Balwin Properties announced a milestone Black Economic Empowerment (BEE) transaction on Wednesday which it says could see black shareholders taking up to 10% of the company’s issued share capital.
The deal, which will boost the group’s empowerment credentials, involves businessman Aobakwe Reginald Koketso Kukama, who will own 51% of a new BEE special purpose vehicle (SPV) that will be able to own up to a tenth of Balwin.
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The balance of the 10% stake is expected to be taken up by a broader base of black shareholders, representing women and the youth.
Kukama is the founder of Yaetsho Investments & Projects, a project management and property asset management group that is also involved in renewable energy. He is behind the Vaal River City Development in Gauteng and has worked with the Mia family – the landowners of the Waterfall mega development precinct – among other business interests.
Balwin says the transaction will entail the setting up of the BEE SPV, which will be able to subscribe for 10% of the group’s issued share capital at a 20% discounted subscription price.
The discount will be applied to the 30-day volume weighted average price of the Balwin’s shares on the JSE.
A representative of the SPV will also be included on Balwin’s board.
Steve Brookes, Balwin’s founder and CEO, hailed the move as a significant milestone for the group.
“Transformation has always been very close to our hearts. This is a process we’ve been driving since listing, and as a board and management team, we are excited to have found the right partner with the skill, drive, technical expertise and experience to complement the growth of the Balwin brand,” he said.
In terms of the transaction, the SPV owned by black shareholders will subscribe for 47 219 260 newly issued Balwin shares.
According to Balwin, the SPV will be controlled by Kukama (with 51% of the shares in the BEE SPV), however, a black female will hold 24% and black youth will hold the remaining 25%.
“The BEE SPV owners will invest R20 million of their own capital in the transaction, with the balance to be repaid from the proceeds of distributions over the next nine years,” Balwin noted in a media statement.
“There is also a lock-in clause of ten years during which the [BEE SPV] shareholding may not be disposed of or encumbered,” the group added.
Brookes says he is looking forward to working with Kukama, stressing that the successful collaboration with its BEE partners will facilitate continued growth of the Balwin brand.
“We are committed to creating a business that is truly diverse, representative, and transformed and we firmly believe that this transaction will assist us in achieving our goals. I have known Kukuma for a few years, having worked with him on developments in Waterfall, so this deal is a natural extension of our relationship,” he adds.
Balwin’s current major residential estate developments in Waterfall include The Polofields, Kikuyu and Munyaka, however the group has developments underway across Gauteng as well as the Western Cape and KwaZulu-Natal.
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“Besides the phenomenal work done by the Balwin Foundation, the operational side of Balwin has made considerable efforts in transforming our business over the past number of years in support of the principles and objectives of the BEE Act. This transaction will significantly improve our BEE scorecard rating,” Brookes further points out.
In its statement on the deal, Balwin noted Kukama’s “vast experience in the property sector” highlighting his specific focus on project management.
“Balwin believes that Mr Kukama will be a value-adding partner who possesses the functional and technical expertise to complement the existing board’s skillset,” it said.
“Mr Kukama obtained a Bachelor of Architectural Studies and Bachelor of Architecture [Hons.] Cum Laude, from the University of Cape Town. He also holds an MSc in Urban Design in Development from the University of London,” Balwin added.
“After completion of his Masters’ degree in London, he returned to South Africa, and was offered a position of associate director and head of urban design at Stauch Vorster Architects in Cape Town. During that period, he became an exchange employee to a leading retail architectural firm in Baltimore, Development Design Group, [which] at that time were designing Cavendish Square for Old Mutual Properties,” said.
Speaking to Moneyweb following the signing of the deal at Balwin’s Bedfordview head office on Wednesday, Kukama said he is looking forward to partnering with the group by “opening new markets and avenues of growth”.
He added: “This is more than a BEE deal. We’ve worked together ever since Balwin’s first residential development in Waterfall started some five years ago. We are just taking our mutually beneficial business relationship to another level.”
Kukama said the housing market, especially in Gauteng, is still set for significant growth due to urbanisation and the province being South Africa’s economic hub.
“Balwin is set to benefit from this and I like both its residential product and business, which is primed for growth,” he explained.