“One of the greatest wealth transfers from shareholders to managers in listed history.” That was the assessment of Sean Hurst, incoming chairman of Dolphin Capital Investors – the small-cap high-end resort developer focused on eastern Mediterranean.
The board is tasked with overseeing the sell-off of the company’s remaining assets and returning as much money as possible to long suffering shareholders. Once the largest real estate company listed on AIM, with a market cap approaching £1bn in 2007, the company had a serious fall from grace in the aftermath of the global financial crisis.
It launched in 2005 and raised more than €850m in a series of placings in its early years but now has a market cap of just £35m. During the same time the manager Dolphin Capital Partners (DCP) has taken just over €188m in management fees.
While Sean is still getting to grips with the task in hand, having taken over from Martin Adams in February 2023, one of his first acts was to cancel the investment management agreement (IMA) with DCP and remove its co-founder and managing director Miltos Kambourides from the board.
The decision was taken with his fellow directors Nick Paris and Nickolai Huls – who with Martin were appointed to the board in June 2021 by frustrated shareholders to oversee the orderly winding down of the company – when they discovered that DCP had entered into an “undisclosed option agreement” with the purchaser of an asset in Greece (the Amanzoe resort in Porto Heli – sold in 2018).
At the same time that the company sold its interest in the resort, the manager disclosed and entered into an agreement to acquire 15% of the special purpose vehicle (SPV) that holds the Amanzoe resort. But undisclosed to the board (and the market), the manager also agreed an option agreement entitling it to acquire an additional 15% of the SPV.
This, the directors state, constituted a repudiatory breach of the IMA. The company is now seeking to pursue all legal options to recover the value arising from the undisclosed option agreement. Miltos denies any wrongdoing.
The value of the 15% option could be material in the context of the size of the company, with the Amanzoe resort now purportedly worth around €200m, but the precise amount is still unknown. Nick and Nickolai have become executive directors and the company has no intention of appointing a new investment manager.
Return money to shareholders
The directors hope to have sold all of the group’s remaining assets by the end of 2024 and return the money to shareholders – who have seen the value of the shares fall 94% from 68p at IPO to just under 4p today.
The eclectic portfolio comprises two construction sites in Greece, a stake in an unlisted property developer in Cyprus (Aristo Developments Ltd) and five plots of bare land bought between 10 and 15 years ago.
An exit plan has been drawn up for every asset and momentum is building. It made its first disposal in December 2022 – selling its 33.3% stake in the One&Only at Kea Island project in Greece for €17.92m, a 17% premium to the June 2022 valuation. The proceeds were used to repay Dolphin’s loans – leaving it debt free. Proceeds from all further sales will be repaid to shareholders.
Sales processes are ongoing. The disposal of its 47.9% stake in Aristo Developments – the Cypriot development company, which is valued at around €40m on the books – is being marketed. Aristo is the largest landowner in Cyprus and the largest holiday home developer in the country. Gross sales at Aristo during the six months to June 2022 increased by 65.8% compared to 2021.
A sale close to the €40m valuation is more than the current market cap of Dolphin. The directors hope a sale can be completed by the end of the year.
Construction is continuing at the Kilada Country Club, Golf and Residences development in Greece, where an 18-hole golf course with residences and beach club is being built, with further construction phases including a 100-room hotel and 88 villas. The asset has a value of around €80m to €90m, according to the directors.
With the sales of the other assets by the end of 2024 (including the Livka Bay Resort in Croatia, where it has rights to build a hotel, villas and marina, which is valued at around €20m, and other land in Greece and Cyprus at various stages of planning consent), shareholders should finally see some return on their investment. Here’s hoping.
QD view – Unpicking Dolphin Capital’s murky past