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Strategic Integrated Project - Mooikloof Mega City Residential Development
Balwin Properties Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
(“Balwin”)
STRATEGIC INTEGRATED PROJECT – MOOIKLOOF MEGA CITY RESIDENTIAL DEVELOPMENT
1. INTRODUCTION
1.1. On 31 August 2020, Balwin issued a SENS announcement advising shareholders that the
Presidential Infrastructure Coordinating Commission Council (“Presidential Commission”)
designated, inter alia, the Mooikloof Mega Residential City: Gauteng (“Mooikloof Mega
City”) as a Strategic Integrated Project (“SIP”) in terms of Government Gazette No. 43547
published on 24 July 2020. This is in an effort by the government to boost the economy post
Covid-19 and to create employment through infrastructure development (the “Initial
SENS”).
1.2. The Initial SENS explained to shareholders, inter alia, the following –
1.2.1.Balwin incorporated a new entity called, Mooikloof Mega City Proprietary Limited with
Registration No.: 2020/136141/07 (“the Subsidiary”), for the purposes of entering into
a corporate joint venture with Seafront Lux Proprietary Limited (“Seafront”).
1.2.2.Balwin was a 70% shareholder and Seafront was a 30% shareholder of the Subsidiary
and Seafront would accordingly share in 30% of the profits.
1.2.3.The Subsidiary had concluded two sale agreements for purposes of acquiring the CPI
Property and the Forum Property. The purchase price of the CPI Property was
R207,368,000.00 (excluding VAT) (“Transaction 1”) and the purchase price of the
Forum Property was R125,132,000.00 (excluding VAT) (“Transaction 2”) and both
agreements were subject to conditions precedent.
1.3. We are pleased to advise shareholders that due to commercial and financial considerations,
the following favourable amendments have been made to the structure of the Mooikloof
Mega City transaction –
1.3.1.Balwin will no longer use a special purpose vehicle (i.e. Seafront) through which to
acquire the CPI Property and the Forum Property;
1.3.2.Seafront will no longer share in 30% of the profits from the Mooikloof Mega City
Project;
1.3.3.Balwin will acquire the CPI Property and Forum Property in its own name in accordance
with the terms explained below.
1.4. The conditions precedent relating to Transaction 1 and Transaction 2 were not fulfilled and
accordingly both Transaction 1 and Transaction 2 have lapsed.
2. SALE AGREEMENTS
2.1. Balwin has concluded a sale agreement with Central Plaza Investments 28 Proprietary
Limited (“CPI”) in terms of which the Remaining Extent of Portion 62 (a portion of portion
1) of the Farm Rietfontein 375, J.R., measuring 133,94 hectares in extent (“CPI Property”)
will be acquired for a total purchase price of R136,945,353.00 (excluding VAT) (“New
Transaction 1”).
2.2. Balwin has concluded a sale agreement with Forum SA Trading 284 Proprietary Limited
(“Forum SA”) in terms of which Portion 1046 of the Farm Rietfontein 375 J.R. measuring
76,90 hectares in extent (“Forum Property”) will be acquired for a total purchase price of
R128,531,914.00 (excluding VAT) (“New Transaction 2”).
2.3. In terms of the Initial SENS, the Subsidiary was acquiring the CPI Property for
R207,368,000.00 (excluding VAT) and the Forum Property for R125,132,000.00. Balwin has
managed to reduce the overall purchase price by R67,022,733.00 which positively affects its
feasibilities for Mooikloof Mega City.
2.4. In terms of the Initial SENS, it was noted that Transaction 1 and Transaction 2 were subject
to Balwin obtaining 100% bank funding. This condition precedent was financially challenging
and was only able to be obtained at lending terms that were detrimental to the feasibility
of the transaction. In terms of the revised agreement, the two properties will not be
acquired simultaneously with the CPI Property being acquired initially with expected
registration taking place during the course of April 2021. Due to commercial considerations
with a view to ensure cash preservation, the Forum Property will be transferred within a
period of 12 months after the CPI Property is transferred and payment will only be made on
date of registration of transfer.
3. DEVELOPMENT FEE AGREEMENT
3.1. In terms of the Initial SENS, Seafront would have received 30% of the profits generated from
Mooikloof Mega City.
3.2. Balwin and Seafront could not agree on certain material terms relating to the joint venture
and accordingly Balwin elected to undertake the Mooikloof Mega City project independently
of Seafront.
3.3. However, Balwin has concluded a Development Fee Agreement with Seafront in terms of
which –
3.3.1.Seafront will receive a fee of R23,000.00 (excluding VAT) (the “Fee”) per apartment
which is transferred to a third party purchaser up to a maximum of 9,460 apartments.
3.3.2.The Fee will only be payable for apartments which are constructed and transferred on
the CPI Property.
3.3.3.The Fee will be subject to no escalation.
3.3.4.The total Fee payable by Balwin to Seafront will at maximum be R217,580,000.00.
4. OVERVIEW OF THE FORUM PROPERTY, CPI PROPERTY AND RATIONALE FOR NEW
TRANSACTION 1 AND NEW TRANSACTION 2
4.1. The landholding of the Forum Property and the CPI Property measures approximately 210
hectares in extent and includes a residential component, 2 educational facilities and a
commercial node. It is envisaged that the Forum Property and the CPI Property would be
consolidated to form one property. A filling station is also considered for the development.
Balwin will only develop the residential component and the educational, commercial and
filling station erven will be sold to a third party (the combined area being approximately 20
hectares).
4.2. Both the Forum Property and CPI Property (collectively, the “Properties”) are located in the
upmarket area of Mooikloof in Pretoria East. The surrounding townships include Woodhill
Golf Estate, Mooikloof Equestrian Estate, Mooikloof Heights, Mooikloof Ridge, The Hills Golf
Estate, Grootfontein Country Estate and Mooikloof Glen. Both Properties are situated on
Garsfontein Drive in Pretoria, Gauteng, approximately 6 kilometers from the Junction with
De Ville Bois Mareuil Drive where Woodlands Boulevard Mall is located and 8 kilometers
from Solomon Mahlangu Drive which gives access to the N4 and other main arterial routes.
The Properties have great exposure to Garsfontein Drive being the main road front on the
northern boundary of the Properties.
4.3. One of the reasons for doing away with the joint venture was to ensure that Balwin had
unfettered discretion and control over Mooikloof Mega City and to receive 100% of the
profits generated. Given the lifespan of this project, Balwin did not deem it feasible to
embark on a joint venture with Seafront. It also creates confusion in the market as clients
want to be comfortable that they are acquiring from Balwin and not a Subsidiary. With the
previous structure, a Development Agreement was to be concluded between Balwin and
the Subsidiary in terms of which Balwin will be appointed as a contractor for the overall
construction, project management and marketing of Mooikloof Mega City which created
confusion amongst clients. By developing Mooikloof Mega City in the name of Balwin, clients
are assured that they will receive high quality and environmentally friendly apartments.
4.4. Balwin will phase the initial 16,900 apartments over 5 developments, with the first portion
estimated to be approximately 2,500 residential apartments. As previously advised, the
township applications to obtain the required density and rights on the Forum Property and
the CPI Property are in the process of being finalised. As Mooikloof Mega City has been
designated a SIP, the town planning and other regulatory approvals for the Forum Property
and CPI Property would be fast tracked because of its social and economic importance.
4.5. Mooikloof Mega City has been designed specifically for the GAP housing market which can
be defined as housing opportunities for people earning a combined monthly income
between R3,501 and R18,000. These are the income earners who earn too much to get a
free house from the government and earn too little to get a bank bond. Accordingly, first
time home buyers and qualifying individuals will have assistance through the Finance Linked
Individual Subsidy Programme (“FLISP”). The FLISP subsidy grants first time home buyers a
subsidy towards the purchase of a home of between R27,960 up to a maximum of R121,626.
4.6. The vision of the development is to create an affordable estate focusing on outdoor living
and utilising the abundance of green space for leisure activities.
4.7. It is estimated that top structure construction should commence in the second quarter of
2021, with the first handovers following approximately 6 months after the commencement
of construction.
5. PURCHASE CONSIDERATION OF THE CPI PROPERTY
5.1. The total consideration payable by Balwin to CPI in terms of New Transaction 1 is
R136,945,353.00 which is to be paid by Balwin on date of registration of transfer of the CPI
Property into the name of Balwin.
5.2. The intention is for the total purchase consideration to be appropriately geared by a
financial institution to ensure maximum conservation of development equity and supported
by the fact that the current value of the CPI Property exceeds the purchase price to be paid.
5.3. Subsequent to the new bank debt in 5.2 above being obtained, Balwin’s debt to equity ratio
will remain comfortably within the 50% target threshold as mandated by the Balwin board.
6. PURCHASE CONSIDERATION OF THE FORUM PROPERTY
6.1. The total consideration payable by the Subsidiary to Forum SA in terms of Transaction 2 is
R128,531,914.00 (excluding VAT) which is to be paid by Balwin on date of registration of
transfer of the Forum Property into the name of Balwin.
6.2. The intention is for the total purchase consideration to be appropriately geared by a
financial institution to ensure maximum conservation of development equity and supported
by the fact that the current value of the Forum Property exceeds the purchase price to be
paid.
6.3. Subsequent to the new bank debt in 6.2 above being obtained, Balwin’s debt to equity ratio
is forecasted to remain comfortably within the 50% target threshold as mandated by the
Balwin board.
7. VALUE OF THE NET ASSETS AND PROFITS ATTRIBUTABLE TO THE NET ASSETS IN RESPECT OF
NEW TRANSACTION 1
7.1. The value of the CPI Property based on an independent valuation is R305,000,000.00 but
the CPI Property will not generate profits in isolation as the CPI Property will be developed
into sectional title residential apartments and profits will be attributed to the sale of the
respective apartments.
8. VALUE OF THE NET ASSETS AND PROFITS ATTRIBUTABLE TO THE NET ASSETS IN RESPECT OF
NEW TRANSACTION 2
8.1. The value of the Forum Property based on an independent valuation is R283,000,000.00 but
the Forum Property will not generate profits in isolation as the Forum Property will be
developed into sectional title residential apartments and profits will be attributed to the
sale of the respective apartments.
9. CONDITIONS PRECEDENT TO NEW TRANSACTION 1
9.1. New Transaction 1 is subject to the fulfilment of the following conditions precedent –
9.1.1. The Board of Directors of Balwin must provide their written approval to New
Transaction 1 by 18 December 2020.
9.1.2. Balwin must raise a loan for an amount of not less than R109,556,283.00 against the
security of the CPI Property by 31 January 2020.
10. CONDITIONS PRECEDENT TO NEW TRANSACTION 2
10.1. New Transaction 2 is subject to the fulfilment of the following conditions precedent
–
10.1.1. The Board of Directors of Balwin must provide their written approval to New
Transaction 2 by 18 December 2020.
10.1.2. Balwin must raise a loan for an amount of not less than R102,825,531.00 against the
security of the CPI Property by 31 January 2020.
10.1.3. New Transaction 1 must be rendered unconditional in accordance with its terms.
10.2. The Forum Property will only be transferred 12 months after the date of registration
of transfer of the CPI Property into the name of Balwin and payment shall be effected
on date of registration of transfer.
11. CONDITIONS PRECEDENT TO DEVELOPMENT FEE AGREEMENT
11.1. The Development Fee Agreement is subject to the condition precedent that New
Transaction 1 and New Transaction 2 must be rendered unconditional in accordance
with their terms.
12. COMPETITION COMMISSION
12.1. The Competition Commission has unconditionally approved New Transaction 1 and
New Transaction 2.
13. EFFECTIVE DATE OF NEW TRANSACTION 1, NEW TRANSACTION 2 AND DEVELOPMENT FEE
AGREEMENT
13.1. The effective date of New Transaction 1 will be the date on which all conditions
precedent have been fulfilled and/or waived.
13.2. The effective date of New Transaction 2 will be the date on which all conditions
precedent have been fulfilled and/or waived.
13.3. The effective date of the Development Fee Agreement will be the date on which all
conditions precedent have been fulfilled and/or waived.
14. JSE CATEGORISATION
3.1. New Transaction 1 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.
3.2. New Transaction 2 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.
3.3. Development Fee Agreement 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
18 December 2020
Financial Advisor and JSE Equity Sponsor:
Investec Bank Limited
Date: 18-12-2020 03:00:00
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