The Tribune

EDITOR, The Tribune

Yesterday did not bring good news to the long-suffering shareholders of BISX-listed Bahamas Property Fund (BPF). Set up over 15 years ago to imitate American REITs (Real Estate Investment Trusts) by acquiring commercial properties and pooling them to create equity shares that would trade as liquid securities, it was a good idea but proved tough to execute in our limited property market.

Unfortunately,  BPF has found  only three (yes, three) properties for its portfolio: the Bahamas Financial Centre in downtown Nassau, One Marina Drive on Paradise Island and Providence House on East Hill Street. The first two have had a variety of banks and other tenants who drifted away leaving 60-65 percent occupancy rates, while the third was a blue-chip investment fully rented by top accountants PriceWaterhouseCoopers (PWC).

But yesterday The Tribune  reported  that PWC too would be moving out. While a new tenant was expected to be signed up “reasonably soon”, inevitably a revenue gap of several months was likely. The past losses combined with this new hit caused BPF to declare a downward asset revaluation of $2.206m and an operating loss of $828m for nine months. No dividends have recently been paid, or proposed.

The news  was released by a BPF Board member, Mr. Michael Anderson. Although the BISX website shows a full Board of Directors including such eminent Bahamians as Sir William Allen, Godfrey Kelly CMG and Mr Barrie Farrington, strangely no one is designated chairman or managing director of  BPF, leaving Mr Anderson as company spokesman. His full-time job is President of Royal Fidelity Merchant Bank & Trust (RFMBT), the well-known joint venture between Royal Bank and the Fidelity Group.

BPF is in effect run by Royal Fidelity. The Fund was organised by an original Fidelity company, who also arranged the initial placement of Fund shares @$5.00. Ever since 2002, Fidelity has served as the Fund’s Investment Manager, earning a fee for its services and making all decisions about property acquisitions and administration, the fund’s sole business.

The fund’s board of directors apparently does nothing more than rubber-stamp these decisions. Neither the Securities Commission nor BISX has commented on this failure to observe standard corporate governance policies, or the absence of Fund officers, and the BPF shareholders have been inert.

They  cannot easily escape this debacle, even at a loss. Despite 26 unfilled sell orders for over 200,000 shares, not a single share has traded for over a year, due to BISX’s own peculiar rules that restrict trading. Although licenced as a securities dealer, Fidelity has been taken no initiative to arrange any trades or share buy backs.

As their most attractive option, the ordinary shareholders (fewer than 100 on the register) could call a special meeting to dissolve BPF as a fund and sell off the individual properties at best market prices, distributing the proceed to BPF shareholders.

However, this action could probably be blocked by RFMBT through its holding of so-called “Management Shares” issued from BPF’s authorised capital.

This is another example of how the best interests of  public shareholders can be frustrated by our corporate finance practices tolerated, to date, by the Securities Commission and BISX.

Richard Coulson    

Nassau

December 13