by Rick Lowe
Facing bankruptcy, as the owners of City Market have been going through in recent months, must be one of the most difficult circumstances imaginable for a business owner. The obligations to employees, shareholders, suppliers, taxes and more are no doubt huge burdens to bear. Not to mention losing the investment of capital and quite possibly other assets pledged as collateral.
On the other side of the coin is the dilemma for the associates and this is compounded in the City Market bankruptcy by the fact that proceeds from the pension fund was used to purchase/build the headquarters and warehouse facility. A building that has allegedly been for sale for some time now in order to satisfy the obligation to former employees that invested their hard earned dollars for their future retirement in the complex.
Complicating the sale of the City Market Headquarters and warehouse has been the economic decline in recent years, forcing possible market values down, and potential buyers have reportedly offered less than the owners think reasonable in the circumstances.
As time marches on, values must certainly be declining as the building sits mostly idle and deterioration sets in, that will inevitably lead to a larger investment than anticipated in the purchase price as a result of the improvements that will be necessary.
Yet, reports are (The Tribune Business, Tuesday, November 6, 2012), that the country's social security arm, The National Insurance Board (NIB), is considering purchasing the building as they are "always looking for great investment properties".
Several questions come to mind:
- Why would the City Market pension fund use retirement funds to build an illiquid asset?
- Why would NIB have a policy to buy commercial buildings (illiquid assets) with retiree funds?
- Will NIB pay current market value for the building or something different?
- What could NIB do with a building that was built for the food store chains warehouse?
- Will the NIB have to renovate the building to rent it out? What would that cost?
Bearing in mind that back in August, Prime Minister Perry Christie reportedly told former City Market associates that he would be resolving the matter it seems peculiar that the NIB would buy a building that does not appear can be sold on the open market. Surely NIB would want to invest in assets that would allow the return of retiree's funds quickly or is there more to this than meets the eye?
There is an apparent conflict of interest here where the political hierarchy is concerned. And while there is every reason to feel empathy for all involved, the lesson of using the pension funds of the City Market employees to build the warehouse and office complex in the first place, should give pause and provide a direction of what should not be done with the national pension fund.
