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RBA buys and develops land on the outskirts of cities in Gauteng and Limpopo. Its main businesses are the acquisition of land, servicing such land and building fully bonded houses in the low-income market, in the price range of between R250 000 and R700 000.
After raising a total of R30m for 30m shares, RBA shares commenced trading on the JSE at 120c, a 20% return. In the first hour, the share came under pressure and traded down to 110c before picking up to a high of 140c/share before midday.
Current shareholders released 35m of their shares at 100c each. The shareholders, who are directors in the company, will own 79% of the 310m listed shares post-listing.
Says David Wentzel, RBA chairperson and CE: "We raised the R30m to acquire land on the edges of cities for township establishment."
Buying and selling
Wentzel says his company identifies and buys the land from owners and then approaches the city council for approvals of township development.
Houses are then sold off plan and most of the construction is carried out by the company, or outsourced to approved builders, says Wentzel.
Currently, the company has secured 11 000 stands in Johannesburg, Pretoria and the Vaal Triangle. RBA has been very busy in areas like Cosmo City in Johannesburg recently.
"We'll hand over 1 000 houses before the end of the year, growing that by between 20% and 30%/year up to 2011," says Wentzel, who started the business in 1997.
He says the 11 000 stands is enough stock for the next five years.
Asked if the recent interest rates tightening phase has affected the company's business, Wentzel says it sells all the land it has available. "The 3% interest rate hike hasn't had an effect on the volumes we do. We adjust house sizes (and therefore prices) as economic factors and fundamentals change," says Wentzel.
As an example: when interest rate rise, RBA's house sizes reduce so as to enable customers to qualify for bonds. "So instead of building the current 70 square metre (the smallest) houses, we might reduce that to 60sqm if rates increase."
Land development
RBA is also active in the construction of RDP houses on government tender.
Of the three major businesses, land development is the most profitable- delivering about 50% of the company's total profit.
The acquisition and sale of land comes second at 35% and construction brings in 15% of the profits. Wentzel says land development entails providing municipal services to the stands, like laying infrastructure pipes.
The company has also just ventured into providing rental stock in the areas in which it develops.
Wentzel says it has secured 1 000 stands in Protea Glen in Soweto to build high-density sectional title units for about R2 000/month rental.
That was necessitated by the increase in interest rates, which leaves a growing number of low income-earners outside the property ownership fold. "We'll definitely grow that business to a significant contributor (to the overall group), says Wentzel.
He says in any township the company now develops it will reserve some stands for rental units.
-I-Net Bridge
