The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The BISX-listed Bahamas Property Fund is “a bit disappointed” it has been unable to find more new tenants for its flagship property, amid hopes that a replacement for its ‘anchor’ will emerge within the next few months.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, and the Fund’s administrator, expressed optimism that occupancy rates at downtown Nassau’s Bahamas Financial Centre would return to the mid-high 70 per cents within the next couple of months.

He told Tribune Business that the Property Fund, a BISX-listed Real Estate Investment Trust (REIT), was talking to several potential replacements for FINCO, which had vacated its ground floor spot.

Disclosing that some 5,000 square feet at the Financial Centre had been leased to smaller tenants in the last few months, Mr Anderson said he expected the “heightened interest” from potential tenants to continue, translating into more sealed lease agreements in 2015.

He revealed that “new interest in the Financial Centre” had driven its occupancy levels to around 75 per cent, prior to FINCO’s September 2014 departure, which dropped them back to 68-70 per cent.

Optimistic that the Property Fund and its shareholders would not have to wait long for a FINCO replacement, Mr Anderson told Tribune Business: “We’re now speaking to a couple of large potential tenants, and within the next couple of months, we hope to get it [occupancy] back up to the mid-high 70 per cents.”

He added that most of the new tenants were banks and financial services providers, in keeping with the Charlotte Street property’s positioning as a property with all the amenities necessary to service that sector.

“I think we’re still a bit disappointed that we’ve not been able to rent more space in the Financial Centre,” Mr Anderson told Tribune Business.

“We’ve seen this change in the market, where a lot more people are coming into the market, but it’s still taking time to tie down leases. We hope to have more signings by year-end, and we’ll have more leases signed next year.”

Mr Anderson was speaking after the Property Fund unveiled its results for the 2014 third quarter and first nine months, the latter showing a 22.8 per cent net income rise to $1.045 million compared to $850,473 for the same period in 2013.

Rental revenues for the nine months to end-September 2014 were ahead 4.1 per cent at $3.018 million, compared to $2.899 million in 2013.

Operating expenses for the period were down by 3.5 per cent at $1.918 million, compared to $1.987 million, with the overall result being that funds from operations rose by 20.8 per cent from $921,872 to $1.114 million.

Mr Anderson said the Property Fund’s results were “slightly better”, although the vacancy rates at the Bahamas Financial Centre and its One Marina Drive property on Paradise Island continue to impact its top and bottom lines.

Higher vacancy rates means lower rental incomes, and also force the Property Fund to pick up a higher share of the Common Area Maintenance (CAM) costs at its properties, raising expenses.

Mr Anderson said the One Marina Drive vacancy rate remained in the “20-odd per cent range”.

The Property Fund is still trying to lease the 3,500 square foot space on the ground floor that will become vacant in March 2015, when Royal Bank of Canada (RBC) exits as part of its branch consolidation and cost-cutting programme.

“We’ve had people looking at it, but have not been able to rent it as yet,” Mr Anderson said. “I think it’s more interesting to people as you can do retail there, and it’s right next to the ferry terminal, so it’s a better space to lease.”

Another 3,000 square feet of space remains vacant on One Marina Drive’s top floor.

Still, Mr Anderson said he expected to see the increased interest shown by potential tenants to continue into 2015.

He added that while the Property Fund’s real estate may not attract large tenants, it was able to “combine space fairly easily”, an attractive feature for the ‘associated’ financial services firms it was drawing interest from.

Mr Anderson confirmed that the Property Fund would also refinance its $3.6 million worth of preference shares next year, exploiting prevailing low interest rates to slash debt servicing costs.

With the existing 10 per cent preference shares set to mature in 2015, Mr Anderson said he expected their interest coupon payments to come down by “one hundred and something thousand dollars, so we will reduce the cost of our debt”.