Brookfield to take over Atlantis resort in debt deal

The Toronto-based asset manager will assume ownership of three assets in the Bahamas and Mexico under a debt restructuring agreement with Kerzner International.

Brookfield Asset Management has agreed to assume ownership interests in three luxury resort properties from struggling resort and hotel operator Kerzner International Holdings. In exchange, Brookfield has agreed to forgive a $175 million loan against the three assets made on behalf of its first Brookfield Real Estate Finance fund in 2006.

The three properties include Atlantis Paradise Island, a sprawling 2,317-room resort in the Bahamas, as well as the One&Only Ocean Club in the Bahamas and One&Only Palmilla in Mexico. Brookfield will hold full ownership interests in the two Bahamas properties and a half interest in One&Only Palmilla, according to the company. The debt on the three resorts was about $2.6 billion when talks between Brookfield and Kerzner began about a year ago. The two parties currently are in discussions to extend the maturities of the remaining debt, which now stands at about $2.3 billion with the debt restructuring and a previous $100 million payment that was part of a maturity extension.

“As part of this arrangement, Kerzner will enter into a management contract with Brookfield to continue managing the day-to-day operations at Atlantis Paradise Island, One&Only Ocean Club and One&Only Palmilla,” said Sol Kerzner, chairman and CEO of Kerzner International, in a statement. “As the manager of these locations, Kerzner will remain in control of all aspects of running these businesses and the resorts will continue to operate as they always have.”

Kerzner, which also has entered into an agreement in principle to restructure its operating debt with lenders, will be shifting its business strategy from that of an operator and owner to a management company. The firm will continue to own the Atlantis and One&Only brand names and retain development rights for future resort properties under those brands.

“We’re excited to own high quality and irreplaceable assets such as Atlantis and Ocean Club, with Kerzner International as the property manager,” said a spokesman for Brookfield, which has approximately $150 billion in assets under management. The deal is expected to close by the end of the year.