The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The BISX-listed Bahamas Property Fund is “looking to grow again” in 2019 through potential acquisitions and rental prospects following a $1.232m “bottom line” turnaround.

Michael Anderson, pictured, president of RoyalFidelity Merchant Bank and Trust, which acts as the Fund’s administrator, told Tribune Business yesterday it is targeting a $1m profit boost from leasing 20,000 square feet of space at the Bahamas Financial Centre.

Besides the possibility of significantly reducing a 35 percent vacancy rate at its flagship property, Mr Anderson said the real estate investment trust (REIT) was eyeing two separate acquisitions “outside of town” in western New Providence.

He added that it was also seeking to “become more of a green-based Property Fund” through the installation of solar panels on its properties’ rooftops, beginning with the downtown Nassau-based Financial Centre, amid advisers’ suggestions that this could slash energy costs by between 30-50 percent.

The RoyalFidelity chief confirmed that the Bahamas Property Fund also intended to “get back on” plans to develop a parking garage to relieve downtown Nassau’s chronic parking woes, and was “still in discussions” over one particular site.

Describing 2018 as “more of a consolidation year” for the fund following successive years of higher vacancy rates and reduced property valuations, Mr Anderson branded the financial results for the 12 months to end-December as “not great” despite the return to profitability.

The fund, which pooled investor monies to acquire a three-strong portfolio featuring the Bahamas Financial Centre, Paradise Island’s One Marina Drive and Providence House on East Hill Street, reversed the prior year’s $699,384 loss into a $532,781 profit.

This was largely achieved through a $600,000 increase in Providence House’s value due to RoyalFidelity, its administrator, signing an agreement to become the property’s major tenant and return it to 100 percent occupancy. This compared to a $1.85m loss on the value of the Property Fund’s entire real estate holdings the year before.

Still, Mr Anderson said last year had established the platform for further gains that the Property Fund plans to realise in 2019. “We have at the moment two potential tenants for the Financial Centre who collectively want about 20,000 square feet of space,” he revealed to Tribune Business.

“It has about 35,000 square feet that is vacant, so to lease 20,000 square feet would be a great step. For every 10,000 square feet rented it’s about a $500,000 contribution to the bottom line. To rent out 20,000 square feet would be an additional $1m contribution to the bottom line.

“That’s what we’re looking to tie down. We have offers out and just need to get them finalised. We’re in that process. It’s never cut and dried, but we have two active inquiries we’re working on. They’re fairly serious inquiries. We are seeing more interest in the Financial Centre.”

The Charlotte Street-based Financial Centre, with its back-up power and significant redundancy capabilities, is a purpose-built property targeted at the financial services industry and others who need such capacity.

The Bahamian financial services industry’s slow decline, together with the 2008-2009 recession and subsequent weak commercial property market, dropped the Financial Centre’s occupancy rate to where it has now stabilised at roughly two-thirds. It has also been hit by increased competition from rival commercial/office building developments in western New Providence.

Nevertheless, Mr Anderson said the hoped-for lease of 20,000 square feet at the Financial Centre would provide the springboard for the Property Fund’s growth rebound in 2019.

“We’re in the market again,” he told Tribune Business. “There are two properties we’re looking at, and we’re looking at the downtown parking garage in terms of getting that done. We are looking at how to grow the Property Fund again.”

The RoyalFidelity chief revealed that the BISX-listed Fund was speaking to “two potential providers” of rooftop solar panels for its properties as part of a strategy to embrace renewable energy, reduce electricity costs and “go green”.

The initiative, which will likely launch in 2019’s second half, will start at the Financial Centre and determine how much rooftop space is available for generating the desired amount of solar energy. Should it prove successful, the plan will be rolled out to both Providence House and One Marina Drive.

“They’ve had this idea that they can cut electricity costs between 30-50 percent if they put those panels on the roof,” Mr Anderson said of the providers. “There’s a certain cost to putting those panels in, but cost recovery will take between five to seven years.”

The Property Fund’s tenants will also benefit from reduced energy costs, and Mr Anderson served notice of its intention to push forward with long-held plans to develop a downtown Nassau parking garage.

“We’re still discussing the same site we have been for the last six to nine months,” he said. “We’re looking to move it. Some of the parties involved are not as easy to move as others. There’s also a timing issue. We need to get back on it.”

Mr Anderson explained that much of the Property Fund’s plans depended on, and will flow from, the potential rental of the 20,000 square feet at the Financial Centre. “What we want to do is make sure we have the cash flows coming in strongly to support any leverage we take on for the acquisitions,” he explained.

“Ideally, we would get those leases sorted out and move forward with the acquisitions. It will be more the second half of 2019. The properties involved are more out west. We are starting to go outside of town.

“We’re very positive about the recovery of the Fund. It’s been through a rough time eve since we saw the start of the decline in 2009, particularly in the offshore banking space. We saw more and more space given up by the offshore banks in that period, but this is the first real sign of people coming back into the market.”

Mr Anderson said RoyalFidelity’s rental of Providence House, and the anticipated Financial Centre leases, would boost the Property Fund’s rental income while also reduce the Common Area Maintenance (CAM) costs it has to pick up for the vacant space across its properties.

The Property Fund’s CAM costs jumped by 42.3 percent to $1.913m in 2018, but Mr Anderson said they had come down appreciably in the fourth quarter due to the agreement for Providence House to be fully leased once again being signed on November 1.

While One Marina Drive remains only 50 percent occupied, the RoyalFidelity chief said its impact was minimised by its relatively small size at 25,000 square feet. “If we rent out 20,000 square feet at the Financial Centre it really offsets any negative impact from One Marina Drive almost,” he added.