Pension fund APS is not doing well
PHILIPSBURG — General Pension Fund APS is not doing well, it appears from a compliance audit into the fund’s financial statements 2022 conducted by the General Audit Chamber. APS’ coverage ratio dipped below 100, several real estate projects (like the eco-hotel in Mary’s Fancy) have become liabilities and the fund’s subsidiary St. Maarten Investment Agency has been sidelined in favor of the Curacao Financial Group, operating as the St. Maarten Investment Company.
“Numerous real estate projects face challenges and postponements,” the report states. The Audit Chamber recommends an analysis of the economic feasibility of these projects, their costs and their expected returns. If projects are deemed infeasible “they may have to be discontinued to prevent further losses,” the audit report states.
APS recorded a loss of 45 million guilders ($25.1 million) in 2022. By increasing the actuarial interest rate with 0.25 percent to 3.5 percent, the coverage rate increased by approximately 4.5 percent.
However, APS objective of maintaining a 105 percent coverage rate has not materialized. Because of this, the fund has been unable to provide indexation since the introduction of the pension reforms.
When the coverage rate is below 100, the Audit Chamber report points out, liabilities are not covered and there is not enough capital to cover general and investment risks.
APS acquired Mary’s Fancy in 2014 with plans to build an eco-hotel on the site. That project started in 2019 but it was suspended in 2022 “due to increasing costs and operational problems.”
The plan to build a parking garage near the government building on Soualiga Boulevard is currently not a top priority for APS. The plan for a professional office park encountered obstacles with permits and costs, so this plan is now under revision.
Things are not going well either with what should have been an affordable housing project on Oryx Hill. APS built 62 homes at the location on Welgelegen Road and the initial plan was to offer full financing to buyers. A shortage of mortgage-eligible participants forced the pension fund to change direction and offer lease-to-own contracts with financing provided by Banco di Caribe. At the end of 2022 44 homes were rented via a lease-to-own construction, 8 were sold based on a mortgage and ten units are still empty.
In May 2016 APS entered into a financing agreement with Rainforest Adventures. In 2021 APS recorded a 2.4 million guilders ($1.34 million) impairment on this deal, because of “non-performance” by Rainforest. In 2022 the situation improved but Rainforest still defaulted, the report states. Parties are now discussing a refinancing agreement.
In April 2020 AP established the limited liability company St. Maarten Investment Agency (SMIA) as one of its subsidiaries, tasked with handling the local investment portfolio. Alas, SMIA did not generate the expected revenue and APS considers it “unlikely” that the company will ever repay the initial investment of 1.3 million guilders ($726,257). APS has written off this investment completely.
On May 1, 2023, APS appointed the Curacao Financial Group, operating as the St. Maarten Investment Company, to act as the fiduciary manager of its local investment portfolio.
The troubles with its local real estate projects are not the only headache for the pension fund. At the end of 2022 the government and other employers owed APS 16.8 million guilders ($9.4 million); 11.4 million ($6.4 million) of this amount was outstanding for more than a year. The government settled 2.8 million ($1.56 million) of this debt in 2023. Of the remaining 8.6 million ($4.8 million), government owes 6 million ($3.35 million) and the other 2.6 million ($1.45 million) is owed by other employers.
The report mention the negative result of international investments (-10.3 percent) as the cause of the declined coverage ratio. The average return on investment in 2022 was -6.13 percent; in 2021 the result was 7.26 percent positive.
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