x Abu Dhabi, UAESunday 23 July 2017

Kerzner sells flagship Atlantis in Bahamas

Kerzner International is handing over ownership of its flagship Atlantis resort in the Bahamas as part of an ongoing effort to manage a huge debt pile.

Kerzner International is handing over ownership of its flagship Atlantis resort in Bahamas as part of an ongoing effort to manage its debt. Orlando Barria / EPA
Kerzner International is handing over ownership of its flagship Atlantis resort in Bahamas as part of an ongoing effort to manage its debt. Orlando Barria / EPA

Kerzner International is handing over ownership of its flagship Atlantis resort in the Bahamas as part of an ongoing effort to manage a huge debt pile.

The Bahamas resort was being handed over to Brookfield Asset Management, based in Toronto, as part of a debt restructuring.

Kerzner will also transfer ownership of the One&Only Ocean Club and the One&Only Palmilla, in Mexico, to the Canadian company. It will continue to manage the properties. Brookfield is to exchange about US$175 million (Dh642.8m) of Kerzner's debt for the equity of the Bahamian and Mexican resorts.

The resort company owns the $1.5 billion Atlantis resort in Dubai in a joint venture with Istithmar.

The Dubai property is not directly affected by this deal, but Kerzner said the "transaction will permit Kerzner to move forward as a management company, allowing us to get back to doing what we do best - designing and managing … destination and luxury resorts under the Atlantis and One&Only brands".

One property analyst in Dubai said Atlantis The Palm had been unable to command the rates it had anticipated, as it opened at the end of 2008, when the global economic downturn spread to the emirate. The resort, the biggest in Dubai, has 1,539 rooms.

"You look at the structure and the kinds of things they have inside," the analyst said. "Their fixed costs are so high and they have to lower their prices to at least cover their costs. That's why they're discounting and packaging."

In October, Brookfield teamed up with Dubai to create a $1bn property fund for the emirate, which was hit hard by the global credit crisis starting in 2008.

Dubai World, through Nakheel Hotels, also announced it was acquiring a 50 per cent stake in the One&Only Palmilla resort in Los Cabos three and a half years ago.

"For some time now, we have been actively engaged in constructive discussions with our various lender groups in order to improve our company's capital structure, optimise the value of our assets and position Kerzner for sustainable long-term growth as a global management company," said Sol Kerzner, the chairman and chief executive.

"[The] announcement is an important step towards that goal, allowing Kerzner to substantially reduce debt and streamline our balance sheet and operating structure."

rbundhun@thenational.ae