Peter Munk's yacht, Golden Eagle, is an impressive piece of glimmering nautical hardware. It is 43-metres long – qualifying it as a superyacht – has three decks and a crew of seven to cater to the guests' every whim. But it is a mere dinghy compared to the floating gin palaces that surround it like condo towers. "The combined value of all these yachts is bigger than the GDP of Montenegro," Mr. Munk says, beaming.
Mr. Munk is not gloating about the wealth of the superyacht owners, some of whom are his friends; he is gloating about the ability of his marina and resort development, Porto Montenegro, to attract rich visitors who are boosting the economy. The development, which has cost Mr. Munk and his co-investors, among them the Russian oligarch Oleg Derispaska, €287-million ($410-million) so far, has created 550 direct jobs in a country with 12-per-cent unemployment and is acting as a magnet for other seaside developments.
The gross domestic product of tiny Montenegro, the former Yugoslavian republic squeezed between Croatia, Bosnia-Herzegovina and Albania on the eastern shore of the Adriatic, is about $4.4-billion (U.S.). The Porto Montenegro investment is worth a hefty 6.5 per cent of GDP, a figure that could easily double as piers are extended, hotels and condos are shaped like sand castles on a beach, and goodies for the rich and pampered, such as a helipad and a golf course, are added to the opulent mix. This year, the yachties got a treat when the marina opened a 67-metre horizon pool, one of the largest of its kind in the world.
Mr. Munk is almost 87. He took on the Porto Montenegro project in 2007 when the site was a defunct, rusting Serbian navy base. "I thought at age 80 I needed this place like a hole in the head," he says. "But now look at it. It's beautiful. I wanted to create a transformational investment out of nothing. I'm very proud of it. Every day, it gets more and more on the international tourist map."
Welcome to the new world of Peter Munk, founder of Barrick Gold, the world's biggest gold company. He reluctantly stepped down as vice-chairman in April – he's now chairman emeritus, which gives him no vote on the board – and misses the company desperately. "Barrick is still me; it's my life," he says in a voice that booms one minute, and fades to nothing a minute later as he becomes introspective or tired (he has heart problems). "How can you do something day and night for 32 years and stop caring about it?"
He especially hated leaving Barrick when its shares were in the tank. The fall of gold prices and the monstrous cost overruns at the high-altitude Pascua Lama project in the Andes conspired to cut the share price in half. Since then, Barrick has appointed a new chairman, ex-Goldman-Sachs banker John Thornton, and sent chief executive officer Jamie Sokalsky packing, replacing him with two co-presidents (Barrick no longer has a CEO).
Porto Montenegro is no consolation prize, but it is keeping Mr. Munk busy – he says he'll keep working as long as he draws breath – and he has an enormous amount of his personal wealth tied up in it. At last count, his personal investment in the project had reached almost $100-million. That's more than twice the value of his two million Barrick shares.
Mr. Munk is sitting in the salon of the Golden Eagle, facing the stern. To his right is the new $60-million Regent Porto Montenegro, the five-star hotel whose opening bash was held Wednesday night. Gleaming white yachts dominate the rest of the view on the Bay of Kotor, the fjord-like natural harbour that the English poet Lord Byron called "the most beautiful encounter between the land and the sea."
Parked on the same pier as the Golden Eagle is the 76-metre Ocean Victory, a five-storey behemoth that is thought to be owned by Vladimir Potanin, the Russian nickel oligarch whose wealth is estimated by Forbes at $12.7-billion (his ownership has never been confirmed and superyachts tend to change owners frequently as their outsized egos push them to trade up to ever bigger yachts). It features a beach club, a helipad, a cinema and hull doors that open like wings to expose a mini-marina stuffed with nautical toys like Sea-Doos.
At the refuelling dock in the distance is the Enigma, a sleek knife of a yacht – 75-metres long – that could pass for a navy frigate. It is owned by a member of the reclusive Barclay family of Britain's Telegraph newspaper fame.
Next year, after the massive concrete piers that were originally built for the Austro-Hungarian navy in the late 19th century are extended, the marina will become the home port of the so-called Golden Fleet – the 100-metre-plus mega-yachts owned by members of the Saudi royal family, which are rumoured to have their own missile defence systems. A fill-up for some of these monsters can cost more than €200,000.
Thanks to Mr. Munk's adept political skills, fill-ups at Porto Montenegro are about half the price it would be elsewhere in the European Mediterranean. That's because Mr. Munk negotiated a sweet deal with the Montenegrin government that allows yachties to avoid fuel taxes and excise charges. As a result, big yachts from all over the Med find that it pays to tie up at Porto Montenegro. But Mr. Munk and his co-investors want the marina to be known as something greater than a cut-rate gas station. They're trying to develop it into a year-round luxury resort that will compete with Monaco, Antibes, Portofino, Flisvos and other established destinations for the floating rich.
Judging from the 95-per-cent occupancy rate of the 250 yacht slips – another 150 are under construction and the total will eventually reach 850 – Porto Montenegro has already made the A-list.
'It's another world'
Porto Montenegro's journey from clapped-out naval base to the world's newest superyacht marina began when Mr. Munk had a rude encounter with a waterborne object.
Mr. Munk has always been fond of yachts (although Golden Eagle is the first he has owned). Several years before he bought the naval base next to the seaside Montenegrin town of Tivat, he rented a yacht and moored it at Monaco, jumped overboard for a swim, felt something strange brush his face and realized it was a spent condom.
That was it for Monaco – he would seek other ports. But where?
Not long after he gave up on Monaco, he was approached by a friend who told him he should invest in Montenegro, which was then still attached to Serbia. Mr. Munk didn't even know exactly where Montenegro was. The country, about the size of Connecticut, had a population of 620,000 and Serbian orthodox Christianity was its most popular religion. It had been the southern rump of Yugoslavia, which got ripped apart during the Balkans wars in the 1990s. After the war, it found itself reluctantly attached to Serbia and was suffering economically as a result of economic sanctions that had been imposed on Serbia and Montenegro during the wars.
To get more information on the country, Mr. Munk called Robert McDougall, who was then Canada's ambassador in Belgrade. "The ambassador said Montenegro is going to be independent and was convinced it would become like Monaco," Mr. Munk said. Indeed, a referendum went in the separatists' way in 2006 and Montenegro has been an independent state since then.
Montenegro happened to be blessed with one of the most dramatically beautiful, deep-water bays on the planet – Kotor – which had attracted the navies of colonizers from the Romans and Venetians to the Yugoslavians, with brief appearances by the French and the Italians along the way. Mr. Munk's friend Mr. Deripaska, who had bought the country's main employer and biggest industry, the KAP aluminum smelter, arranged a meeting with Montenegro's Prime Minister, Milo Djukanovic. Before he knew it, he was flying over the Bay of Kotor in a military helicopter, mesmerized. "I had never seen a place like this," Mr. Munk says. "I fell in love with it."
At the time, the 24-hectare site was littered with the corpses of the Yugoslav navy's submarine fleet and other hulking bits of Cold War detritus. Mr. Munk assembled a group of wealthy investors, among them his son Anthony Munk, Mr. Derispaska and Lord Jacob Rothschild, the fourth baron of the Rothschild banking dynasty, and bought the gutted seaside strip for a mere €23-million. Most of the amount went to pay the pensions of the 400 shipyard workers who had lost their jobs.
That's when things got ugly. The Montenegrins, upset that the naval base was to receive the kiss of death, and suspicious of the new colonizers in the form of yacht-owning millionaires and billionaires from afar, took to the streets in the thousands to protest. There were rumours that Mr. Djukanovic, whose family owns one of Montenegro's biggest bank and who had been investigated by Italy's anti-Mafia unit over a billion-dollar cigarette smuggling operation (the charges were dropped in 2009), had struck a bad deal for Montenegrins.
The protests eventually melted away as jobs were created and the Montenegrins realized that the new investors were no hit-and-run tightwads. Under managing director Oliver Corlette, an Australian who had worked with Anthony Munk at Onex, Gerry Schwartz's private equity company, fortunes were plowed into the wrecked naval base. The first yacht berths were opened in 2009. A waterfront promenade, complete with retail village and restaurants, came next. Then it was an international school for the captains' children and a naval museum dominated by two restored submarines. The condos have attracted wealthy buyers, including Ivan Glasenberg, the billionaire CEO of Glencore International of Switzerland, the world's largest commodities trader.
The sale of the condos has financed the expansion of the marina. Mr. Corlette explains that the marina's profit margins are fat. Once built, piers require little maintenance and are rented at high prices (though lower than the prices charged by the French and Italian marinas). The yearly lease of a berth for a 50-metre yacht is about €60,000. "The port is a very nice business," he says. "You effectively lease out water. Nothing breaks, unlike in a hotel."
The people of Tivat would rather have Porto Montenegro than not, but more than a few think the touted economic benefits are overblown. Some shop owners think Porto Montenegro effectively operates as a closed economy. "Porto Montenegro is breathtaking, but their clients don't want to come here," said local travel agent Ivana Millic, whose shop is only a few hundred metres from the marina. "It's another world."
Branimir Gvozdenovic, Montenegro's Tourism Minister, realizes that not everyone in Tivat is suddenly clad in pearls and diamonds because of Porto Montenegro's arrival but insists the wealth will come. "Give it time," he says. "People forget that, seven years ago, this property was completely vacant."
A 'transformative project'
The opening party for the Regent Porto Montenegro, which is owned by Mr. Munk and his investors but managed by Regent, the Taiwan hotel giant, was supposed to be a blow-out party studded with the great and the good. It fell a bit short.
The VIP list was pretty much limited to Roman Washuk, Canada's ambassador to Serbia and Montenegro; Regent chairman Stephen Pan; Mr. Djukanovic, who has been Montenegro's Prime Minister on and off for two decades; Lord Rothschild; and Mr. Munk himself.
A few of Porto Montenegro investors were there, including Hungarian billionaire Sandor Demjan, who controls TriGranit, one of Europe's biggest construction companies. But notably absent were two prominent Porto Montenegro investors – Mr. Deripaska and Nathaniel Rothschild, Mr. Rothschild's youngest child.
It was no great mystery why Mr. Deripaska was a no-show. KAP, the Montenegrin aluminum smelter he bought in 2005, proved to be a disaster for both him and the Montenegrin government, which forced it into bankruptcy last year in a messy affair that is seeing the oligarch sue the government for €100-million. Everyone at the party agreed that the lawsuit would make Mr. Deripaska's presence at a public event with the Prime Minister uncomfortable.
The younger Mr. Rothschild's no-show was harder to explain, although it's an open secret that he has been at odds with both his father and with Mr. Munk. Nathaniel joined the Barrick board, at Mr. Munk's urging, in 2010, and left in early 2013, also presumably at Mr. Munk's urging. Mr. Munk lost money on Bumi, Nathaniel's Indonesian coal business whose shares have lost more than half their value in the last year.
Still, the event put a huge smile on Mr. Munk's face. The VIP guests heaped praise on Porto Montenegro. Mr. Washuk called it "an amazingly transformative project" for the little Balkan country. In a short, charming speech, Lord Rothschild called it a "miracle." In a long, dull speech, the Prime Minister called Porto Montenegro "the model for hotel development" in his country.
Mr. Munk was typically energetic and passionate. He thanked the investors, employees and government ministers for "believing in us … for making [Porto Montenegro] a showcase for the world," then, like a crusader for capitalism, warned the country to avoid any temptation to make life difficult for foreign capital. "For your country, don't let this industry die," he said. "Believe in them [the investors], trust them, encourage them."
Then about 300 guests flowed into the hotel for drinks. One elegantly dressed woman fell into the hotel's decorative shallow pool. A few wandered off to the seaside discotheque, the rest returned to their condos, yachts and Regent hotel rooms. No one went into Tivat and Mr. Munk no doubt climbed aboard the Golden Eagle wondering, at age 86 and shorn of Barrick, what project would capture his attention next.