Dubai World and its joint-venture partner in the Fontainebleau Miami Beach resort have offered US$100 million (Dh367.3m) of new equity to lenders as part of a debt restructuring plan in an effort to retain ownership of the property, reports say. Istithmar World, the investment arm of Dubai World, yesterday said the resort was a good investment that it planned to support.
"We believe Fontainebleau Miami is a valuable asset with a solid future," it said. "We are working with our joint-venture partner to ensure its considerable potential is realised." The 1,054-room South Florida resort, which was featured in the films Scarface and Goldfinger and hosted world-famous guests including Frank Sinatra and Elvis Presley, is jointly owned by Dubai World and Miami property developer Jeffrey Soffer.
Two years ago, Dubai World paid $375m for a 50 per cent interest in Fontainebleau Miami Beach. The resort then underwent a $1 billion restoration, reopening in November 2008, just as the hotel industry worldwide was suffering in the global economic crisis. The hotel also took a hit, with room rates declining. The Fontainebleau Miami Beach borrowed more than $620m to fund the restoration programme and, according to Bloomberg, the owners have not paid their lenders since September.
Mr Soffer has been bruised by the economic crisis. His bankrupt $3bn Fontainebleau Las Vegas resort project was sold to the investor Carl Ichan for $156m this year. Dubai World, which is working on restructuring $26bn of debt, in December lost its W New York Union Square hotel for $2m in a foreclosure auction. Istithmar World paid about $282m for the property in 2006. A spokesman for Istithmar World at the time expressed disappointment that the lender had chosen such a route, and added that Istithmar "felt real progress was being made in negotiations with the various lenders to restructure the debt of W Union Square for the future".
The spokesman said Istithmar had "provided considerable equity and support to W Union Square to help service the debt", but because of the economic downturn it was "not prudent to continue to do that". This month, Istithmar World handed over an apartment building in New York to its lender, Danske Bank, after defaulting on a $300m mortgage. It had bought the building, which was the former Knickerbocker Hotel, in 2006 with plans to convert it back into a hotel.
Amid the broader Dubai World debt restructuring process, there has been much speculation that Istithmar may try to sell some of its assets. Among others, it owns the luxury retail chain Barneys New York and a 20 per cent stake in Cirque du Soleil. Istithmar World also owns the Mandarin Oriental hotel in New York, the W Washington hotel, the Turnberry golf resort in Scotland and the Queen Elizabeth 2 ocean liner.
David Jackson, the former chief executive of Istithmar World who oversaw some of the investment firm's most high-profile purchases, resigned in January. @Email:rbundhun@thenational.ae
