The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The BISX-listed Bahamas Property Fund is predicting a 40 percent net profit boost from the $455,000 annual lease of office space that will have been empty for more than one year.

Michael Anderson, the Property Fund's administrator, told Tribune Business that more than 12,000 square feet of space vacated by the (PwC) Bahamas accounting firm will be taken over by RoyalFidelity Merchant Bank & Trust from February 1, 2019.

Mr Anderson, who is also RoyalFidelity's president, emphasised that the transaction had been conducted on an arm's length basis, with the investment bank taking over the space at the same rental rate and terms as PwC enjoyed.

The move, which will return Providence House on East Hill Street - one of three office buildings owned by the Property Fund - to 100 percent occupancy, comes as the BISX-listed real estate investment trust (REIT) continues its efforts to locate a suitable site for a multi-storey parking garage in downtown Nassau.

Mr Anderson revealed that it is also seeking to expand its property portfolio, which currently also includes the Bahamas Financial Centre in downtown Nassau and One Marina Drive on Paradise Island, either by acquisition or developing a vacant site.

He added that the Property Fund was especially interested in western New Providence opportunities as this would enable it to diversify away from central Nassau to an area where companies were increasingly seeking office space in a less traffic-congested area.

However, the immediate boost that the Property Fund and its shareholders will receive comes from securing RoyalFidelity as a tenant, since this will increase top-line rental income while also eliminating the Providence House common area maintenance (CAM) costs it was incurring.

"RoyalFidelity will relocate there early next year from February 1 and take all that space available for rent in that building," Mr Anderson told Tribune Business. "The total square footage being leased is 10,205 square feet, and then 1,984 square feet of storage space.

"There's another tenant, Inter-Trust, that has stayed there renting about 3,000 square feet. The total annual rental will be in excess of $455,000 a year, including CAM, which will be a net contributor to the bottom line of the Property Fund to a similar amount. That should be a 40 percent-odd increase to the bottom line associated with that deal."

Mr Anderson said RoyalFidelity will "take over the property on the same terms as agreed with PwC", bringing Providence House back to 100 percent occupancy just over a year after the accounting firm exited.

"It's a significant impact and good for us to get that building tenanted," he added, "and now we need to focus on our other buildings, One Marina Drive and the Financial Centre, in terms of getting their occupancies back up again.

"We've had expressions of interest from parties, more in the Financial Centre than One Marina Drive, and it's trying to find people with a need for space in town. At the moment there's a general exodus of people from town so they're hard to find.

"People are paying a lot more for moving out west than they'd need to rent in town, but some people don't want to deal with the parking issues, and there's a lot of people moving out west to live that don't want to travel far."

Mr Anderson told Tribune Business that solving downtown Nassau's chronic parking shortage was not only in the area's best interest but that of its office property landlords, including the Bahamas Property Fund with its Charlotte Street-based Bahamas Financial Centre.

"There are a number of buildings downtown with similar problems, so if we can find suitable space for a parking garage we will rent that space out to people who want a parking space for their tenants; we could rent space to building owners downtown," he said.

"We've had conversations with a number of parties to find a piece of suitable land, and conversations are ongoing, but we've not made up our minds on a piece of land for it. It needs to be large enough to justify putting up a multi-storey parking lot on it to meet the needs of downtown office buildings and be attractively priced so people can afford to pay for it."

Should the Property Fund be successful, and not only locate but build such a facility, Mr Anderson said it would directly link to efforts by the Downtown Nassau Partnership (DNP) and others to enhance Bay Street and the surrounding area.

The Financial Centre's current occupancy rate is in "the mid-60 percents", with around 35,000 square feet vacant, while One Marina Drive has between 5,000-6,000 square feet that is empty. The Property Fund is not only losing rental income but has to cover the CAM cost for that space itself, resulting in a squeeze from both the top-line and expense line.

Expressing confidence that the BISX-listed fund will find sufficient tenants to fill the space, Mr Anderson indicated it was looking to expand its existing three-strong portfolio - even to the extent of constructing a new-build development property if it could secure a commitment from a long-term tenant.

"We continue to look for other buildings, and possibly having a building out west where people seem to be moving," he told Tribune Business. "From a development perspective it would be a good idea for us to look at. We're ultimately trying to find where people want to find space, and we may even look at developing a property if we can find a tenant long-term that can justify the investment.

"We are looking at one particular building and need to speak more with them. There's one building we're seriously considering that's fully tenanted at the moment, so it could be a desirable property for us."