By NEIL HARTNELL
Tribune Business Editor
The BISX-listed Bahamas Property Fund could next year pay its first dividend for a decade if it can capitalise on momentum from a new government tenant to hit a 70 percent average occupancy.
Michael Anderson, the Property Fund’s chairman, told Tribune Business that it had brought occupancy rates at its flagship Bahamas Financial Centre property in downtown Nassau back in line with this target after the Registrar General’s Department executed a lease to rent one-sixth of its 100,000 square feet.
With its Providence House property 100 percent leased, he added that the remaining challenge was to solve the 70 percent vacancy rate at it third and final property, Paradise Island-based One Marina Drive, which has been especially hard-hit by the COVID-19 related tourism shutdown.
Arguing that high-end commercial office space has “been a tough market for at least the last 10-15 years” since the 2008-2009 financial crisis, Mr Anderson said the Bahamas Property Fund was also eyeing a potential shopping centre acquisition - which he declined to identify - as a means to diversify its portfolio of real estate holdings.
With banks and trust companies in the international financial services industry largely continuing to work from home amid the COVID-19 pandemic, he added that the government’s decision to lease a significant portion of the Bahamas Financial Centre for its agency had come as a timely relief.
“We’ve been fortunate in that we were able to rent out some space to the government,” Mr Anderson told this newspaper. “That lease finally went through at the Financial Centre. That lease was waiting for 18 months to get finalised. The Registrar General’s Department is taking 16,600 square feet.
“They’re moving in. The lease was signed a week or so ago. I think we’ve been at just over a 40 percent vacancy rate there. This brings us to just over 30 percent, or a 70 percent occupancy rate, which is obviously an improvement over where we’ve been.
“Historically, most commercial office spaces have expectations of a 90 percent occupancy rate, so being down at 70 percent is not great but, taking into account the situation at the moment, it’s a good boost for the Property Fund and a step up for the occupancy rate.”
The Bahamas Property Fund’s 2020 audited financial statements have yet to be released, but Mr Anderson said both its Bahamas Financial Centre and One Marina Drive properties felt the full force of COVID-19’s economic devastation as tenants opted to either work from home or pull out completely.
This was especially felt at One Marina Drive, a property targeted at tourism-related businesses in the attraction and excursion industry, whose enterprises were either shutdown or heavily restricted by COVID-19 public health measures for the majority of 2021.
“Some paid rent up until a certain date when they left, and others just left,” Mr Anderson said of One Marina Drive. “As the tourism business comes back in the 2021 second half of the year, we will see more tourism and marina operators come back, and improvements in the occupancy rate at One Marina Drive.
“That building is built for tourism. It is currently around 30 percent occupied and 70 percent vacant.” He also acknowledged that financial services-related tenants at the Bahamas Financial Centre, on Charlotte Street, may also reassess their office space requirements following the switch to home working as a result of the COVID-19 pandemic.
Mr Anderson, though, said none of this had stopped the Bahamas Property Fund from seeking out potential acquisition opportunities. “We declined a couple of opportunities over the last six to nine months,” he told Tribune Business, “and are currently looking at one that is not an office space but a shopping centre.
“It’s more to diversify out of office space and get into retail. I think we see an opportunity to get back into growing our portfolio particularly where certain assets are not performing as they should be and it’s a time to buy when things are not as strong as they could be. It’s always difficult to find property at the right price.”
Acknowledging that shareholder returns have been lacking for the past decade, he said: “The Property Fund is like a yield driven fund, where it gets a certain yield based on occupancies, and it’s been close to ten years since we paid a dividend because occupancy rates reduced steadily over that period ever since the financial crisis and never came back.
“We are trying to get to where our occupancy numbers across the three properties average 70 percent. Providence House is 100 percent and the Financial Centre at 70 percent now. But with the 70 percent vacancy rate at One Marina Drive we’re closer to 65 percent across the three.
“If we get more space occupied this year we may get around to paying a dividend next year.” However, given the weak economy and increased supply of space in western New Providence, Mr Anderson conceded that the market for high-end ‘Class A’ commercial office space continues to struggle.
Citibank has just taken space in the Caves Village corporate centre, moving out of its long-standing Thompson Boulevard headquarters building which is now up for sale. The Property Fund chief said: “There’s very limited demand for office space at the moment. There haven’t been very many entities in the market, and people want to move west.
“The commercial property market has been a tough market for at least the last 10-15 years with the building of a number of office buildings out west, and more space to rent and the relocation of a lot of banks and law firms’ offices out of town. Before the dip in the economy and relocation out west, most people will have seen a significant increase in vacancy rates.”