The board of the West Indian Co. Ltd. met Thursday to defend it’s management of Havensight Mall on St. Thomas, a day after the Government Employees’ Retirement System announced its decision to not renew WICO’s management agreement for the property.
In a statement announcing the move, GERS officials said the they made the decision in part “so that the mall can finally reach its full potential,” but Thursday, WICO Chairman Joseph Boschulte and Director of Property Management Anthony Ottley said Havensight Mall was performing as well as could be expected.
“I think it’s important for us to highlight the fact that the Havensight Mall property, right now and in the entire U.S. Virgin Islands, probably has the highest occupancy rating,” Boschulte said.
He added that in the territory most real estate professionals will tell you commercial properties have been harder to rent, a trend that started more than 10 years ago with the onset of the worldwide recession.
“In the territory as a whole, I don’t think real estate prices have rebounded, particularly in commercial real estate,” Boschulte said.
When members asked Ottley if GERS was capable of managing the mall and if GERS costs would go up, Ottley said, “It would be hard for me to answer that question. I know that there are going to be significant costs for them, just like we experienced significant cost with maintenance people, custodians, etc.”
“I made it a point to send it to GERS, that this is a very old property. We have been around from 1912, so we have situations as far as old piping and cast iron, we have water leaks and leaks that come up from the ground. Hence why WICO has purchased heavy equipment to be ready for those instances,” Ottley said.
Under its management contract, WICO receives a six percent management fee taken from rental revenues. All the other expenses that appear are costs for running the mall, which include salaries, repairs and maintenance. Ottley said these are costs that any property manager would accrue for running the mall.
WICO’s management fee for the 2019 fiscal year was approximately $358,000 according to WICO’s CFO Cheryl Brown-Petersen.
“In reference to the total expenses that were associated with running the mall in fiscal year 2019, we actually expended $3.3 million approximately to run the mall. That does include the management fee that was paid the West Indian Company Limited,” Brown-Petersen said.
Gone are the days when the highest paying tenants were within the mall, tenants such as Rolex and Gucci, Ottley said, describing this situation as a “grand exodus of class A clients,” which was largely a result of the economy and the hurricanes.
Because there are fewer ships and less tourist traffic than there had been in the past, tenants need lower rental rates to sustain their businesses. Ottley said to fight with GERS for lower rents to “stop the hemorrhaging” of tenants, and lower rents meant lower revenues for GERS. Ottley said at one point GERS’ revenues from the mall had been 30 to 40 percent higher than they are now. But the lower rents allowed WICO to achieve a 90 to 91 percent occupancy rate, Ottley said.
“We even have a good relationship with the Havensight Merchant Association. They met with GERS and they expressed, before this decision was made, their concerns for WICO not managing the mall,” Ottley said.
Boschulte said WICO is still a critical part of the tourism economy and the mall management decision won’t change that.
“The West Indian Company will move ahead and move on with or without the management of Havensight Mall and we as the company have to recognize that we … are the largest contributor to the tourist economy and they come right here through the WICO dock,” he said. “And we have a herculean job to continue to do on behalf of the territory and we definitely want to move forward.”