By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Property Fund’s administrator yesterday said “the future lies” with securing multiple small tenants instead of larger ones, as it moves to seal the resolution of a $1.082 million tax dispute with the Government.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that the BISX-listed fund was looking to “finalise” a verbal agreement over the real property tax sum owed by its One Marina Drive property.

Speaking after a year in which the Real Estate Investment Trust’s (REIT) net income soared to $2.589 million, compared to just $78,547 in 2012, Mr Anderson said the Fund was looking forward to lower debt servicing costs come 2015.

Having already consolidated its two outstanding bank loans into one, the Fund is also awaiting the refinancing of its existing $3.5 million preference shares when they mature on July 31 next year.

Mr Anderson, meanwhile, told Tribune Business that the significant year-over-year bottom line improvement had resulted from a more than $2.2 million positive swing on the revaluation of its real estate assets.

After suffering a ‘net fair loss’ of $987,661 on the value of its three properties - downtown’s Bahamas Financial Centre, Paradise Island’s One Marina Drive, and Providence House (home of PricewaterhouseCoopers (PwC) - in 2012, the Fund saw this reversed into a $1.251 million gain in 2013.

Acknowledging that the results for the two years would be similar if the revaluations were stripped out, Mr Anderson said the upward valuation recognised that the two main properties were still generating good rental income

This was despite vacancy rates of 30 per cent and 23 per cent at the Financial Centre and One Marina Drive respectively.

While the Financial Centre had seen a “recovery” in vacancy rates come the end of 2013, with another small tenant signed-up recently and another two in the pipeline, that had come before FINCO’s recent decision to shut its ‘anchor’ ground floor branch in May.

Acknowledging that the loss of FINCO, which has paid rent up until October 2014, was a setback, Mr Anderson argued that smaller tenants was “where the future lies”.

“Rather than get 10,000 square foot chunks, we’ll be looking for more of the 2,000-3,000 square foot tenants, and our buildings are set up to accommodate smaller spaces,” Mr Anderson told Tribune Business.

He added that the bank loan consolidation, folding a fixed-rate loan into a variable rate variety, was done for “simplicity of debt servicing”, and had produced slightly lower principal and interest rate costs.

As for the existing preference shares, which carry an extremely high 10 per cent coupon in today’s market, Mr Anderson said: ‘The idea obviously will be to refinance them, either through new preference shares or bank financing to repay them.

“It will depend very much on the rate environment at the time and how the market looks, but I’m sure the preference shareholders would like to roll them over.”

As for One Marina Drive’s tax issues, Mr Anderson told Tribune Business that the Fund was looking to complete a three-year process to settle the matter.

“That should get resolved shortly,” he said. “They changed their property tax assessment retroactively, and we’ve been trying to sort that out ever since.

“We’ve verbally reached an agreement with the Government, and just need to finalise it now.”