The Tribune

• Property Fund ‘interested’ in Rodney Bain Building

• Renews acquisition and $100m portfolio ambitions

• Profits jump 45% as flagship’s occupancy ‘over 80%’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed fund yesterday declared its continuing interest in solving downtown Nassau’s parking woes by redeveloping the Registrar General’s former home as it renews ambitions to expand to a $100m property portfolio.

Michael Anderson told Tribune Business that the Bahamas Property Fund remains keen on delivering “a massive improvement” by converting the former Rodney Bain Building, at the junction of Shirley and Parliament Streets, into a multi-storey parking garage with condominium units “on top”.

The RF Bank & Trust president said that its recent “recapitalisation” - which saw bank debt replaced with $8m worth of preference shares - will revive both its acquisition hunger and the resumption of investor dividend payments.

With a dividend declaration set to be made “in the next few weeks”, and the balance sheet freed to take on new debt to finance property acquisitions, Mr Anderson told this newspaper that the fund is seeking to diversify both in property type and location.

While specific opportunities have yet to emerge, he said it wants to expand from its present narrow focus on office buildings into retail/shopping centres and “even the residential space”. And the Fund is also aiming to expand geographically beyond Nassau and Paradise Island via the potential acquisition of western New Providence.

Mr Anderson said increased occupancies, especially at the Fund’s flagship Bahamas Financial Centre property in downtown Nassau, coupled with the preference share financing strategy had begun to bear fruit during the 2022 first half as net income rose 44.5 percent year-over-year to $364,771.

And, with the full benefits yet to come through, he predicted that the year’s final six months will be “a lot stronger” and produce “a significant improvement” over the first half as the full impact of the new Financial Centre leases is felt.

“This idea of recapitalising the Fund was also with an eye on adding more properties to the portfolio,” Mr Anderson told Tribune Business. “We don’t have any bank debt, and have significant capacity to take on future debt with the balance sheet we now have.

“We don’t have any specific properties that we have made any progress with, but we are now actively looking for opportunities; getting back to paying dividends, getting back to acquisitions, and starting to inch forward again. It’s been a long ten-year period struggling to get it back on track.”

The Bahamas Property Fund has never lost its enthusiasm for developing a multi-storey garage that can solve downtown Nassau’s long-standing parking shortage, and Mr Anderson affirmed: “I’m still interested in doing that.”

Having identified the Government-owned Rodney Bain building as a potential location for such a project, he added: “Principally it’s a government-related issue where they have to decide what they’re going to do with that property. It’s not a significant problem for them or much income to come from the sale to justify getting involved with.

“The building has been condemned and is in a dilapidated state, and for the downtown area it would make a massive improvement if we get to retool that space. What we’d like to do is create a blend of residential and parking space; condos on top, that kind of thing.

“I think there’s an increasing interest in having people reside downtown. With the new cruise port coming on stream, hopefully there will be a renewed interest in doing things downtown a lot more assiduously. We’re still interested in doing that,” Mr Anderson continued.

“There’s a few things that the Government has to go along with, and there’s the space next to it that they have to sort out, but it would make a big difference. If the Government figures out what to do with that property, we can move forward.”

While height and size might be different, the concept outlined by Mr Anderson would be the same as the 14-storey parking garage and condo complex proposed by Dr Conville Brown at the junction of Collins Avenue and Sixth Terrace. There appears to be a growing recognition among developers that, with remaining land on New Providence increasingly limited, the only way to build is to go vertical.

Mr Anderson, meanwhile, affirmed to this newspaper that growing the Property Fund to $100m in assets is “still the target”, an ambition that would require it to near-triple its present $36.7m portfolio.

He added that it is also seeking to “diversify into shopping centers or some other properties where it’s not as entirely reliant on office space”. Besides the Bahamas Financial Centre, the Fund’s other properties include One Marina Drive on Paradise Island and Providence House on East Hill Street where RF Bank & Trust is based.

Retail and residential leases tend to be shorter than the typical office variety, with the former normally lasting for two to three years and the latter five years. Residential leases are often shorter than that, for one year or less.

“We’re looking at diversifying out of office space into other areas, so we are looking at other opportunities,” Mr Anderson confirmed. “The western area of New Providence would be fine, and we are looking at some properties out there, but we don’t have any active discussions or negotiations.”

Mr Anderson spoke after the Property Fund saw its total rental and parking income rise by 7.6 percent year-over-year to $1.58m for the 2022 first half. As a result of the increased Financial Centre occupancies, landlord expenses dropped by 15.2 percent or $136,000 year-over-year to $752,159 as tenants paid a growing share of common area maintenance (CAM) costs.

The reduction in landlord expenses was offset by a sharp jump in legal fees to $191,876, likely associated with the recently completed $8m preference share offering, but Mr Anderson said the bottom line improvement was largely driven by increased Bahamas Financial Centre occupancies from the Registrar General’s Department and other government tenants moving in.

He added that the “over 80 percent occupancy rate is a significant improvement over the prior year, where it was down as low as 55 percent; somewhere around there”. The RF Bank & Trust president added: “It’s really good to see the interest that we have in the Bahamas Financial Centre, and so we now have less than 20 percent to rent out.

“It’s nice position to be in, and we have other people interested in that space. One Marina Drive is around the mid-30s in occupancy, and Providence House is 100 percent occupied. Overall, in terms of total space, we have around 160,000 square feet and of that we’ve most probably got 120,000 rented.

“That’s a significant improvement over prior years. That reflects some of the tenants coming in, and since then we’ve had even more. The rent to June does not really reflect that, so the income for the second half of the year will be a lot stronger than for the first half. I expect the second half of the year to be a significant improvement over the first half with all these new leases coming through.”

Mr Anderson said party of the rationale for replacing bank debt with the preference shares was to place the Property Fund “in a good cash position to pay dividends. We’ll be making an announcement shortly on dividends in the next few weeks”.

Conceding that it had been more than a decade since equity shareholders last received a dividend, he added that the Fund has finally emerged to a point where it has good occupancies, is on a solid financial footing and can thus return capital to investors more consistently.

With tourist-related activity starting to rebound on Paradise Island, Mr Anderson voiced optimism that One Marina Drive, located between the two bridges connecting New Providence, will soon start to lower its vacancy rate.

A much smaller property of around 20,000 square feet, he added that only 12,000 needs to be filled but - with tenants typically taking smaller spaces - it may require finding at least five or six.