The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The BISX-listed Bahamas Property Fund yesterday said it expects a “definite improvement” in earnings for 2014, amid hopes that “at least three outstanding lease requests” materialise into firm deals.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, said the commercial real estate investment fund had “a lot of upside” despite the short-term drag created by its inability to rent vacant space.

Some 20,000 square feet, or 20 per cent, of the total space at its flagship Bahamas Financial Centre property in downtown Nassau remains available, while another 3,000 square feet - some 10-15 per cent of the total - is empty at its One Marina Drive property on Paradise Island.

Mr Anderson, who serves as the Fund’s administrator, told Tribune Business: “We haven’t been able to rent out the additional space, notwithstanding the higher level of interest we have.”

Unsure of whether one potential tenant would return to rent “a couple of thousand square feet”, the RoyalFidelity chief focused on the positive while acknowledging that the plentiful supply of commercial real estate gave firms options and depressed rental rates.

“Because we’ve got a number of outstanding requests for rental space, I’m confident we will lease some of it, but it’s hard to know,” he added.

“Some of these deals have been on the block for six months, but people are holding off. It’s a long-term process. People are getting competitive quotes from other people, getting deals such as some rent-free periods. It’s a long, drawn-out process.

“But there are a lot more people looking to rent space. Since the beginning of the year we’ve seen a higher level of interest, but that’s not materialised in terms of new leases.”

The reduction in rental income, coupled with the Common Area Maintenance (CAM) costs the Fund must carry for the vacant space, continue to impact its results.

For the 2013 half-year, top-line rental revenues were relatively flat, down 3.3 per cent at $1.937 million versus $2.002 million in 2012. It was a similar story with total revenues.

For the six months to end-June 2013, the Fund’s total expenses were also flat - standing at $1.322 million compared to $1.315 million the previous year.

With funds from operations standing at $621,5907, compared to $700,350 the previous year, the BISX-listed real estate investment trust saw its net income fall by 10 per cent year-over-year - to $573,078 from $636,350.

“There hasn’t been any fundamental change in CAM allocation or CAM costs, or rental income, which is not good,” Mr Anderson conceded, “but we’re still generating a lot of cash flow and earnings, and that leaves a lot of room for upside.

“I am confident, whether it happens this year or next year, we will see an increase in the level of our earnings. We’ve got at least three outstanding lease requests, and if some of them materialise, there should be a definite improvement over where we are this year.”

Mr Anderson said the Fund’s 2013 second half performance was expected to “at least” match the first six months.

He added that some of the new inquiries were coming from overseas businesses looking to establish a commercial presence in the Bahamas, which he described as a positive sign.

“Like the rest of the market it’s hard to get things tied down,” he added. “People are not wanting to commit, and want to save themselves money.

“Everyone is in the same boat. There’s still a lot of space in the market, and for people price is the key.”