The distressed debt vulture now gobbling up the Cayman Islands

Having made a fortune out of the woes of countries such as Greece and Argentina, Ken Dart’s next challenge was how to spend it. Cue a spending spree that has made him the ruler in all but name of the offshore tax haven

Blake Schmidt
Wednesday 11 November 2015 02:02
Ken Dart operates his real estate firm out of Camana Bay, a white-beach rimmed, scuba-diving paradise for the rich and famous
Ken Dart operates his real estate firm out of Camana Bay, a white-beach rimmed, scuba-diving paradise for the rich and famous

Two decades after Ken Dart renounced his US citizenship and took his tax attorney with him to the Caribbean, the billionaire bond investor and local kingpin is reinventing himself as the Cayman Islands’ biggest real estate owner.

One of the best known of the fund managers who target countries facing debt crises, Mr Dart’s investing strategy in nations on the verge of default has stirred up resentment around the globe. Argentine president Cristina Kirchner tagged him a “vulture” for trying to squeeze the country to repay its distressed debt at full market value, and he reportedly made hundreds of millions in Greece’s debt restructuring in 2012.

In a rare glimpse into Mr Dart’s holdings, Mark VanDevelde, the chief executive of the tycoon’s Cayman-based Dart Enterprises holding company, recently told Bloomberg that Mr Dart is less interested in distressed foreign debt these days, increasingly turning his focus to luxury real-estate development on the Cayman Islands and elsewhere, especially in Latin America.

Distressed debt “is a small part of our overall portfolio,” said VanDevelde. “We had demand for office tenants so that’s where growth has been since conception. We’re now shifting our focus towards resorts and residential.”

Mr Dart’s mid-1990s move to the British territory in the Caribbean, far from his family’s Michigan-based polystyrene cup business, was widely criticised as a brazen tax dodge. Today, he’s often seen strolling the grounds of his upscale Camana Bay, which includes a residential development, a marina and town centre with offices that cater largely to hedge funds and other financial companies.

Camana Bay hotel guests dine at an outdoor patio overlooking a tennis court where Sir Richard Branson recently played Anna Kournikova. Paul Allen cuts through the local waters from time to time in his 414-foot yacht.

But you’d never know any of this belonged to Mr Dart. There’s only a small placard on the entrance of one of the development’s office buildings with his name on it. No Trump-like trumpeting, here.

Camana is the crown jewel of Mr Dart’s land holdings, which now account for upwards of 8 per cent of this white-beach rimmed, scuba-diving paradise for the rich and famous. He has also snatched up land for development in Turks and Caicos and the Bahamas as well as in at least 10 other countries.

The company takes pains to stress that along with the luxury resort developments, Mr Dart is setting aside land for conservation. “He has hundreds of thousands of acres, in Patagonia, Australia, New Zealand, US, Mexico, Jamaica, Canada, and most of those lands are in remote, pristine areas,” said Mr VanDevelde. “The locations lend themselves to conservation efforts.”

In his role as Cayman Islands developer and jobs generator, Mr Dart is emerging as a kind of leading member of the local monied gentry. His projects have served as a counter to the economic woes wrought by the 2008 financial crises. At the time, assets under management of some 10,000 hedge funds registered on the island dropped by almost half from $3.4trn (£2.2trn), according to Anthony Travers, the Cayman Islands Stock Exchange chairman. In 2009, the local economy contracted 7 per cent.

In addition to his real estate activities, Mr Dart has also boosted the local economy by headquartering his global investing business at his resort and office development.

From his Cayman Islands offices, he manages a $5bn fortune, according to the Bloomberg Billionaires In-dex, including about $700m in at least 10 biotech companies, as well as billions in profits from decades of distressed debt investments.

Over the years, Cayman’s governors have welcome Mr Dart’s deep pockets. As well as real estate, he also has made investments on the islands in retail, finance, construction services and technology.

“We’ve had seven lean years and if it hadn’t been for Mr Dart, the local economy would’ve looked a lot worse,” Mr Travers said. “But there is a question mark over where Dart’s involvement in the Cayman Islands ends up. He is starting to control a substantial part of the local economy.”

In his biggest power grab yet, Mr Dart pushed through a $400m deal with the government in 2010. This provided the permits he needed to build a new waste treatment facility, extend a highway, and redevelop an abandoned Marriott site. As part of the deal, Mr Dart agreed to build a professional career training centre and provide $16m for government social programmes.

But the plan angered some islanders, who objected that it was being pushed through without proper government approvals and that it came with “hundreds of millions of dollars” in tax and fee concessions, according to a report released in June by the government’s auditor general.

Mr Dart’s dealings with the island government also show how tax havens, intended to attract wealthy investors, can end up putting local governments at a disadvantage: when a government is weakened by its lack of a tax base, it can’t really negotiate with tycoons whose dollars they’ve worked so hard to bring in.

“We have in this country an entity of seemingly unlimited wealth, known as the Dart Group, that over the past 10 years has accumulated large amounts of real estate and has grown in leaps and bounds,” lawmaker Osbourne Bodden said in an editorial for the local news website Cayman iNews in March 2012.

His People’s Progressive Movement became the ruling party in the 2013 elections after it opposed Mr Dart’s deal with the government. “The masterplan is indeed to make these islands Dart Islands – make no mistake about that,” Mr Bodden said.

The spat has not slowed Mr Dart’s expansion. He is in the middle of negotiating a similar deal with the current government. “If you’re worth billions and have limitless cash, things happen,” Mr Travers said. “It’s a relentless development.”

© Bloomberg News

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