The Government Employees’ Retirement System governing board voted this week to not renew the West Indian Company’s management agreement for Havensight Mall. Cost savings and increasing revenues were the main reasons GERS cited in a statement Tuesday announcing the change.
Due to past V.I. Legislature generosity to retirees and a growing ratio of retirees to current government employees, GERS is rapidly liquidating its trust fund and all of its assets and is projected to exhaust all its resources and cease being able to pay full amounts on pensions by 2024. It will have to either sell Havensight Mall too, or if the mall is sufficiently profitable, use its profits as a small source of support to pensions.
A statement from WICO says GERS has found the mall to be one of its best performing assets.
The West Indian Company Limited owned the Havensight Mall property from 1912 to 1993, when GERS purchased it. WICO has managed the mall on behalf of the retirement system for 26 years and GERS has declared the mall to be one of the system’s best performing assets during that time. In 2009 the management contract was put out to bid, and WICO had managed the property on a month-to-month contract since then.
The GERS board made the decision to not renew the management agreement after meeting with WICO’s governing board on Oct. 17.
“This decision was made in the best interest of the GERS members, not only as a cost saving measure to increase the revenues generated by the mall, but also for the implementation of GERS’ vision, so that the mall can finally reach its full potential,” GERS officials said in a statement.
WICO issued a statement saying GERS cited the pension’s insolvency when it told the government owned company the news.
“With a century of experience successfully managing commercial properties in the U.S. Virgin Islands, we are naturally disappointed by the decision of the GERS board,” acting WICO President Anthony Ottley said.
Representatives from both entities will come together for the first of several meetings to facilitate a smooth transition, according to the statement.
“We will fully cooperate with GERS during this transition and aim to limit the impact on the tenants and our employees during this process,” Ottley said.
The management agreement specifies a six-month transition phase.
While WICO’s main revenue source is its cruise ship pier, which serves the majority of the cruise ships visiting St. Thomas, the loss of revenue is still bad news for WICO, which has been struggling financially. WICO is roughly $7 million behind on its $700,000 annual payment in lieu of taxes to the V.I. government, which owns it. That is about a decade behind.