Tycoon to invest big in Montenegro

MUNK'S MONTENEGRIN MAKEOVER

Canadian gold baron Peter Munk thinks millionaire yacht owners can be lured from the French Riviera to a converted military harbour in Montenegro

TIVAT, Montenegro - At a time of economic crisis, can millionaires and their yachts be lured from the French Riviera to a former military dock in the Balkans?

The founder of the world's largest gold company thinks so, and next month kicks off sales in his project converting the ex-navy port in Tivat, Montenegro, into a yachting marina.

Yet in a country that holds elections in 10 days amid growing economic woes, some complain about developing an elite complex for the wealthy when many locals are not well off.

In an interview late on Wednesday, Peter Munk, 81, founder and chairman of Barrick Gold, said the global economic crisis offered a chance to sell services at relative bargain rates for the world's growing numbers of yachts.

"None of those yachts out there are going to be sunk," he said. "But they are going to be looking for good value...It's a tremendous opportunity."

"The Adriatic is currently on par with the Cote d'Azur," he said by telephone from the ski resort of Davos, Switzerland. "But you can save on two-thirds of the costs."

Munk is converting the navy port into a four-kilometre, 630-berth marina and resort complex at the entrance to the Bay of Kotor, a scenic region that once sheltered the Venetian navy. His company Porto Montenegro says locals will receive jobs and other benefits from the investment.

During a tour last week, Porto Montenegro looked very much like an aging military port, with an old submarine drydocked and a large crane and other Yugoslav-era relics scattered about. But lights illuminated a new dock with potted palm trees.

The complex lies behind a wall along the main coastal road. Some protested when the old shipyards closed, fearing job losses at the biggest local employer, or an unfair insider deal.

Billionaire Munk said he became interested through his holdings in Hungarian real estate developer Trigranit. As he considered investing a few years ago, he met Milo Djukanovic, Montenegro's pro-European Union leader who has dominated politics in the former Yugoslav republic for two decades. "He impressed me very much," he said.

Munk bought the 25-hectare complex for three million euros ($4.05 million), and appeared sensitive when asked about the bargain price.

"I got a good deal because I made a commitment to invest," he said. "The price is not the issue: the issue is how much I had to pay in social costs."

In a deal finished in 2007, he agreed to pay 15 million euros compensation to 460 workers who lost their jobs at the old port, spend 18 million on infrastructure and another seven million euros on cleaning up the site.

Munk, a Hungarian native and Canadian citizen, said the financial crisis will hit yacht owners. But he said if, for example, a Russian oligarch must sell a mega yacht at a fire sale price, a new owner of slightly more modest means might want a cheaper alternative to famed ports such as St. Tropez, Palma de Mallorca or Monaco.

Oliver Corlette, Porto Montenegro's managing director, said a berth would cost 130,000 euros annually for a 75-metre yacht, compared to about a million euros a year in Antibes, France.

"That project is intriguing," said World Bank representative Jan-Peter Olters. "It appeals to a segment that might be least affected by this crisis. It might just work."

Even though Munk has considerable wealth from gold, one of the most robust investments in the current crisis, some see wider economic forces slowing the project.

"We recognize that Mr. Munk is a serious investor, but nonetheless problems could arise if the economic crisis spreads in Montenegro, which is likely," said Aleksandar Damjanovic, an opposition member of parliament.

Munk owns a controlling stake in Porto Montenegro, with minority shareholders including Bernard Arnault, chairman of LVMH luxury goods group, and Russian billionaire Oleg Deripaska, who owns Montenegro's troubled KAP aluminum plant.

The first berths and residences should be ready by summer, although none has yet been offered for sale. "We have definitely slowed down the build-out of our development in order to understand what the demand will be," said Collette.

Reuters