On February 21, 2006, the Agency of Montenegro for Economic Restructuring and Foreign Investment [1] announced in the daily newspapers “Pobjeda” and “Danas” a privatisation procedure by means of an International Public Tender for the total State owned capital in the joint-stock company Jadran A.D. - Perast, i.e. 1,234,884 shares or 70.7816% through the Republic Fund for Pension and Disability Insurance (370,431 shares or 21.2323%), the Employment Bureau of the Republic of Montenegro (123,500 shares or 7.0788%) and the Development Fund of the Republic of Montenegro (740,953 shares or 42.4699%).

Formerly operating in the clothing/trade sector and registered since 2003 as a provider of hotel and catering services, Jadran A.D. has a valuable portfolio of properties, situated in extremely favourable locations, including the famous and very attractive XVIIIth century Palace Smekja [2] (Palata Smeća) of 2,500 m² in Perast (a former factory complex), the plant “New Work-shop” of same size, as well as ten store- and work-shops in Perast, Kotor, Podgorica, Bijelo Polje, Belgrad (around 150 m²) and Vrsac. The nominal value of the entire company is €4.2 million or €2.56 per stock; its current value on the stock market about €5.

On May 6, the tender documents (€5,000) were already bought out by six potential competitors: Russian firm Sobenko, British Pluto Capital, Jadranski Razvoj from Dubrovnik (Croatia), Imobilija from Budva (Montenegro), Montemlin from Podgorica (Montenegro) and German investor Michael Brim. It’s at that time that Prince Nikola Petrovic Njegos, acting as Consultant Architect inside a consortium formed of offshore companies — Kapri Holding (Island Jersey) and Boka Fund Ltd. [3] (Bahamas), in association with the Spanish Stein Group, decided together to enter into the race for Jadran A.D., followed in this way by American Silverleaf Capital Group and several competitors more, the last one being Banyan Tree Hotels & Resorts from Singapore.

According to the model of privatisation, in the particular case of Palace Smekja that is located in one of the best-preserved Baroque areas on the Adriatic coast, investors have to renovate the Palace into a high-class hotel. Situated in central Perast, near St. Mark’s Church, this unique stone-built [4] seafront edifice with a belvedere and balustraded balconies is the biggest palace of the town, consisting of two main buildings: The old palace erected in 1760 between the coastal and the old road, and its enlargement of which construction began in 1764 but was only finished in 1936 on the model and in the style of the existing ground and first floors; the two structures being connected each other by a vaulted passage above the old road.

Initially fixed on May 22, the deadline for bids submission has been extended to June 5, 2006 17:00pm. At this term, among all the eleven buyers of the tender documents, only five bids were finally registered:
• Consortium Boka Fund: €6.66 million for State owned shares with obligation on investing €17.3 million more;
• Imobilija: €5.1 million with €10.0 million more of investments;
• Consortium Montemlin-Adriatic Express (Budva): €4.5 million in cash and double more of investments;
• Muller Trading Enterprises (Panama): €4.0 million with €12.0 million more of investments; and
• Silverleaf Capital Group: €3.0 million with €12.0 million more of investments.

In mid-June, twelve days after the closing of the tender for Jadran A.D., a delegation of Consortium Boka Fund including Prince Nikola Petrovic Njegos (coming from Paris) and John Kennedy (coming from London), co-founder of Boka Fund Ltd. [5], came to Perast to talk to Jadran’s Director, Mr Vlado Vukasović, in order to search for architectural solutions complying with obligations that will be presented to the successful bidder after the announcement of the tender — one of the most important points that will face the new owner. “Keeping the architectural integrity of Palace Smekja and the town of Perast is fundamental in the success of the future five-star hotel with spa. The main challenge for the new tourist complex will be to keep all as in 1760 while using the most modern technologies and offering a high-standard comfort. Expert evaluation in our Consortium are confident with this obligation, in order that the future Palace Hotel Smekja be established as completely integrated into Perast and not as a town of Perast around an hotel. Perast must remain a live town and not an amusement park,” emphasised the representatives of Consortium Boka Fund in their statement distributed to the newspaper “Vijesti”. “Our obligation to maintain the aestheticism of Perast is the reason for which our first visit after the closing of the tender is strictly connected to the search for architectural solutions,” added Kennedy.

Nevertheless, although Consortium Boka Fund has been the best bidder, on October 20, 2006 — the day of the public announcement of the tender, the Commission for Tourism turned Imobilija from Budva for the purchase of Jadran A.D. According to the assertions of the Commission, in spite of making a less attractive offer, Imobilija was however chosen because it has accepted the sales contract in the form in which it was offered to it, among other things binding itself to turn Palace Smekja into a five-star hotel within two years, and immediately providing warranties for the investments in an amount of 50% of the total sum. Always according to the Tender Commission, it was explained that the representatives of the Consortium Boka Fund gave terms that were unacceptable for the State and therefore were terminated.

From its side, the Consortium Boka Fund by the voice of John Kennedy claimed that it never refused to sign the sales contract and has not been informed of the deadline by which the contract must be signed. “We never received a letter from the Tender Commission informing us that we have been eliminated, and we have not been refunded with the €200,000 paid as bid guarantee. The amount of €6.7 million for the transaction is still deposited on our account at the Montenegrin Commercial Bank in Budva and is waiting for payment to Montenegro’s Funds,” Kennedy said, adding that the Consortium Boka Fund asked the Tender Commission to provide it with assistance to obtain the construction permit. According to him, in Perast, no permit can be issued before enforcement of the detailed construction plan (DUP). “The Tender Commission has ignored that fact and signed a sales contract with the second bidder, which offered €1.5 million less for the shares and €8 million less for investments than ours ... I wonder how Imobilija could complete the project without the construction permit!”

In that context, on December 22, 2006, the Consortium Boka Fund announced its decision to sue together the Development Fund of the Republic of Montenegro, the Republic Fund for Pension and Disability Insurance and the Employment Bureau of the Republic of Montenegro, and the company Imobilija to Podgorica Business Court, requesting the cancellation of the sales contract for the majority block of shares of company Jadran A.D. “We do hope that Montenegro’s Courts of Law would decide in this case, and implement international contractual standards. One cannot expect from buyers to complete the projects in due time and at the same time be denied the right to start with the project,” Kennedy said.

Jadran A.D. - Perast: Tender Announcement

Jadran A.D. - Perast: Documentation I

Jadran A.D. - Perast: Documentation II