Government employees to buy South African landlord that builds 3,000 homes a year

South Africa’s Public Investment Corporation is in talks to buy out minority shareholders of real estate developer Balwin.

Africa’s largest fund manager and a group of investors will offer R4.35 a share to buy the stake in an all-cash deal, said transaction adviser Mesh Pillay.

That puts the enterprise value of the business at about R2.26 billion, according to a Bloomberg calculation.

Once the transaction is concluded, the company will be de-listed because “as a pure-play property development company, the protracted development cycle for large residential developments in South Africa has constrained the company’s ability to raise capital and consistently pay dividends,” Pillay said. 

Balwin is South Africa’s largest housing developer in a country with a backlog of about 2.6 million homes, according to the Department of Human Settlements.

Africa’s largest economy also has a young and increasingly urban population, with job-seekers flocking to cities and deepening shortages in the lower to mid-income housing market. 

The company currently builds about 3,000 houses a year, mostly on a build-to-sell basis. The bulk of  homes are rolled out in the more affordable sector, where prices range from R800,000 to R1.2 million each. 

Once the buyout of minority shareholders is completed, Balwin will focus on raising money needed for its project pipeline, said Pillay.

The PIC will form a consortium that includes the founders of the business, Steve Brookes and Rodney Gray, who will continue as stakeholders and managers of the company. The PIC will hold almost 50% of the entity, said Pillay. 

Working with the PIC and potentially other government entities, Balwin will aim to boost its construction numbers to 5,000 homes per year, which equates to about 13 every day, he added.