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BALWIN PROPERTIES LIMITED - Acquisition of prime property in Johannesburg south

Release Date: 29/11/2021 12:45
Code(s): BWN     PDF:  
Wrap Text
Balwin Properties Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
(?Balwin?)



ACQUISITION OF PRIME PROPERTY IN JOHANNESBURG SOUTH 1. INTRODUCTION
Shareholders are hereby advised that Balwin has concluded a Sale Agreement (the ?Agreement?), with Tentacle Properties Proprietary Limited (the ?Seller?) in terms of which Balwin has agreed to purchase the Properties described in paragraph 2 below on favourable payment terms which include a deposit and a payment per apartment over the life of the project to settle the outstanding balance as explained in paragraph 4 below (the ?Transaction?).
2. OVERVIEW OF THE PROPERTIES AND RATIONALE FOR THE TRANSACTION
2.1. Balwin has agreed to acquire the following properties subject to certain terms and conditions ?
2.1.1. A portion of Portion 111 of Farm Rietvlei 101 IR, Province of Gauteng held under Certificate of Consolidated Title No. T69365/2017; measuring approximately 92,0724 hectares in extent;
2.1.2. A portion of Portion of Remaining Extent of Portion 46 of Farm Rietvlei 101 IR, Province of Gauteng, held under Title Deed No. T78558/2009 measuring approximately 20,7448 hectares in extent;
2.1.3. A portion of Portion 80 of Farm Rietvlei 101 IR, Province of Gauteng, held under Title Deed No. T78558/2009, measuring approximately 1 hectare in extent; 2.1.4. A portion of Portion 84 of Farm Rietvlei 101 IR, Province of Gauteng, held under Title Deed No. T78557/2009, measuring approximately 25,5840 hectares in extent; 2.1.5. A portion of Portion 76 (a portion of portion 41) of Farm Rietvlei 101 IR, Province of Gauteng held under title deed number T31175/2021 measuring approximately 6,0846 hectares in extent;
2.1.6. A portion of Portion 77 (a portion of portion 42) of Farm Rietvlei 101 IR, Province of Gauteng held under title deed number T31175/2021 measuring approximately 6,0925 hectares in extent;
2.1.7. Portion of Portion 16 of the farm Rietvlei 101 IR, Province of Gauteng held under Title Deed No. T22774/1947 measuring approximately 81,5062 hectares in extent; 2.1.8. Portion of Portion 31 of the farm Rietvlei 101 IR, Province of Gauteng held under Title Deed No. T152184/2002 measuring approximately 2,9828 hectares in extent; 2.1.9. Portion of Portion 34 of the farm Rietvlei 101 IR, Province of Gauteng held under Title Deed No. T152184/2002 measuring approximately 13,5608 hectares in extent; 2.1.10. Portion of Portion 35 of the farm Rietvlei 101 IR, Province of Gauteng held under Title Deed No. T152184/2002 measuring approximately 22,8402 hectares in extent; 2.1.11. Portion of Portion 36 of the farm Rietvlei 101 IR, Province of Gauteng held under Title Deed No. T152184/2002 measuring approximately 28,1144 hectares in extent; and
2.1.12. Portion of Portion 62 of the farm Rietvlei 101 IR, Province of Gauteng held under Title Deed No. T152184/2002 measuring approximately 2,9828 hectares in extent;
(Collectively hereinafter referred to as the ?Properties?).
2.2. The relationship between Balwin and the Seller has been established over the past two decades and a common vision is shared between both parties who have worked in good faith to reach an agreement on the development of the Properties.
2.3. Balwin has been negotiating with the Seller over the past decade to acquire these Properties for purposes of developing a world-class eco estate. Initially, Balwin acquired the land on which its existing Thaba Eco Village project is situated from the Seller but after rigorous negotiations, it has now concluded the Transaction which will effectively extend its existing Thaba Eco Village development in Johannesburg South. The Properties measure in aggregate approximately 300 hectares in extent of which approximately 150 hectares is developable.
2.4. The proposed development, commonly referred to as ?The Greater Thaba Development? fits the ?world class eco estate? vision perfectly due to the existing green areas, proximity to the Klipriviersberg Nature Reserve, the topography of the land and the success of the existing Thaba Eco Village launched in 2020.
2.5. The number of apartments to be developed on the Properties is estimated at 7,443 apartments and the development will be a mix of Balwin?s Green and Classic collections. The development will also consist of luxury duplexes and free standing residential dwellings to be constructed by third party construction companies specialising in that field.
2.6. The development will establish a firm pipeline for Balwin in the south of Johannesburg for the next decade and will provide the opportunity for purchasers of various income groups to own a home in a world-class eco estate. The acquisition of the Properties will permit Balwin to establish a strong footprint in a high demand area, south of Johannesburg, which fits in with its overall vision for Gauteng.
2.7. The Properties are situated within the vicinity of the upmarket Thaba Eco Hotel which is a rapidly developing family-friendly suburb surrounded by an abundance of green space. The Property is close to the N3 andN12 highways and other arterial roads. The Greater Thaba Development will be accessible off Klipriviersberg roads via the N12. The development will consist of various amenities, including without limitation, a school, value retail, a filling station, a Crystal Lagoon, an Art Park, a vast green space allowing for trail running, mountain biking and hiking.
2.8. Balwin intends to construct a Crystal Lagoon in this development and bring the beach life to Johannesburg South.
2.9. The vision for the green space encompasses the creation of a Green Flag rated hiking trail and the construction of a green-bridge, linking the Thaba development to the Klipriviersberg Nature Reserve, creating approximately 1,000 HA of conservancy in the south of Johannesburg.
2.10. In addition, it is Balwin?s vision to apply for the status of a UNESCO World Heritage site for the reserve area, which will stimulate foreign tourism to the area and overall metropole.
2.11. Various species of wildlife and game will be incorporated into the reserve areas to attract tourism as part of the existing Thaba Eco Hotel, as well as add value to the residents of the various developments in the existing node.
2.12. The Property will be designed for clients looking for affordable housing combined with a unique lifestyle offering complemented by breath-taking sceneries, quality schools, medical facilities and shopping centres. The design of the apartment blocks is focused on blending into the surrounding natural beauty, with no negative impact on the existing scenery.
2.13. The vision of the development is to create an Eco Estate focussing on outdoor living and utilising the abundance of green space for leisure activities.
2.14. The Lifestyle Centre (which will be owned and managed by Balwin) will allow for direct public access, increasing the commerciality of the Lifestyle Centre and its operators.
2.15. Balwin will phase the development and it is estimated that top structure construction will commence during Q1 2026, with the first handovers following approximately 6 months later. These timelines will be heavily influenced by the various regulatory approvals required for the development but our professional teams are committed to ensuring that the vision for the Greater Thaba development is brought to life timeously. 3. PURCHASE CONSIDERATION
3.1. The total consideration payable by Balwin to the Seller in terms of the Agreement is at a minimum of R100,000,000 (excluding VAT) and at a maximum of R330,000,000 (excluding VAT) (?Purchase Consideration?), which is to be paid by Balwin as follows -
3.1.1.R15,000,000 (excluding VAT) non-refundable deposit is payable to the Seller on board approval;
3.1.2.R5,000,000 (excluding VAT) non-refundable deposit is payable to the Seller on 26 August 2022 in the event that Balwin still deems the development feasible and the various regulatory approvals are falling into place;
3.1.3.R10,000,000 (excluding VAT) non-refundable deposit is payable to the Seller on the date that all conditions precedent are fulfilled;
3.1.4.The balance of the purchase price is payable as and when the apartments are registered in the name of third-party purchasers and is subject to no escalation.
3.2. It should be noted that at this stage, it is not possible to determine the amount payable per apartment as the final purchase price is to be adjusted depending on the density achieved as well as the total cost of external engineering services installation. The following assumptions were utilised by Balwin for purposes of the Transaction ?
3.2.1.At least 7,443 apartments must be approved by the local authority; 3.2.2.External engineering services costs to be no more than R311,428,000.
3.3. Based on these assumptions, the Sellers will receive a Purchase Price of R300,000,000.00 and the following amounts will be paid per apartments ? 3.3.1.R42,972 per Classic Opportunity; 3.3.2.R30,386 per Green Opportunity; 3.3.3.R69,467 per Duplex Opportunity.
3.4. If the density approved by the local authority is less than 7,443 apartments and the total external services costs increases, the ultimate Purchase Price payable by Balwin will decrease. Conversely, if the density approved by the local authority is more than 7,443 apartments and the external services cost decreases, then the Purchase Price would increase but is capped at R330,000,000.00.
3.5. In the event that the external services cost increases to such a degree that the Seller would receive less than R100,000,000.00 (one hundred million Rand) (excluding VAT) and if Balwin elects to proceed with the Developments despite the increased external services cost, Balwin will pay the Seller in aggregate R100,000,000.00 (excluding VAT) as and when apartments are transferred, provided that Balwin has received all of the necessary local authority and environmental authority approvals for the Greater Thaba Development on terms acceptable to it in order to enable it to proceed with the development and render the construction of the development as feasible and rationale to its board of directors and shareholders.
3.6. Any deposits paid will be deducted from the aforementioned amount and the balance of the Purchase Consideration is payable as and when apartments are transferred.
3.7. The balance of the Purchase Consideration outstanding from time to time will not be subject to any escalation and there is no long stop date for payment.
3.8. The initial R15,000,000 deposit payable on approval by Balwin?s board together with the R5,000,000 deposit payable on 26 August 2022 will be funded from existing cash reserves and in the event that this Transaction fails due to non-fulfilment of any of the conditions precedent the deposit can be absorbed into the existing Thaba Eco Estate feasibility which will have a negligible effect on the profitability of that project.
3.9. Balwin intends to raise funding for the installation of the external engineering services and the Properties will stand as security.
3.10. Subsequent to the new bank debt in 3.9 above being obtained, Balwin?s total debt to equity ratio will remain comfortably within the 50% target threshold as mandated by the Balwin board.
4. VALUE OF THE NET ASSETS AND PROFITS ATTRIBUTABLE TO THE NET ASSETS
The value of the land to be acquired is at maximum R330,000,000 (excluding VAT). The land will not generate profits in isolation as the land will be developed into sectional title residential apartments and profits will be attributed to the sale of the respective apartments. 5. CONDITIONS PRECEDENT TO THE TRANSACTION
5.1. At the date of this SENS announcement, the Board of Directors have approved the Transaction and the following conditions precedent remain outstanding ? 5.1.1. Documentary evidence acceptable to Balwin confirming that the relevant departments in the local authority (City of Johannesburg), as well as any other provincial or national authority will approve the Greater Thaba Development consisting of no more than 7,443 apartments;
5.1.2. Balwin to obtain acceptable bank funding for at least R320 Million (or a lesser amount acceptable to Balwin) which will be utilised for the installation of external engineering services.
5.1.3. The PWV16 road reserve being downgraded to a municipal road, falling under the jurisdiction of the Johannesburg Road Agency (JRA).
5.1.4. An Environmental Authorisation (EA) being granted for the development and macro vision by the Gauteng Department of Agriculture and Rural Development (GDARD). 5.1.5. The sale agreements for the acquisition of Portion 33 and the council owned land being rendered unconditional in accordance with their terms. (In the event that the City of Johannesburg request an exorbitant purchase price, Balwin will not proceed with the Transaction. However, from preliminary discussions with the City, this does not seem to be the case as the land is land locked and they are amenable to make the land available for development).
5.1.6.Balwin to obtain written consent from Rand Water Board that the Seller and Balwin may utilize Portion 8 of Farm Rietvlei 101 IR for an Eco-Bridge, game drives and animal grazing. 6. EFFECTIVE DATE OF THE TRANSACTION
In terms of the Agreement, the effective date of the Transaction will be the date that all conditions precedent are fulfilled. 7. JSE CATEGORISATION
The Transaction is categorised as a Category 2 transaction in terms of paragraph 9.5(a) of the JSE Listings Requirements and accordingly no shareholder approval is required. Johannesburg 29 November 2021 Sponsor: Investec Bank Limited Date: 29-11-2021 12:45:00
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