The Tribune

By NEIL HARTNELL

Tribune Business Editor

BROOKFIELD Asset Management's ownership takeover at Atlantis and the One & Only Ocean Club has been described by a leading accountant as "the best thing that ever happened for the Bahamas".

Raymond Winder, managing partner at Deloitte & Touche (Bahamas), told Tribune Business it was to this nation's advantage that ownership of its leading resorts was in the hands of a deep-pocketed investor with more than $150 billion in assets under administration, able to take care of Paradise Island's "current and future needs".

Mr Winder pointed out that, unlike Kerzner International, Brookfield would not have to rely as heavily on - or even go to - the capital markets to finance the investment needs of its Bahamian assets, thus avoiding the need to take on the kind of debt financing that ultimately led to last week's restructuring.

And the Bahamas could prove an attractive investment destination for Brookfield, Mr Winder said, due to this nation's Tax Information Exchange Agreement (TIEA) with Canada recently coming into force. As a Canadian company, Brookfield will now not be subjected to any taxes in its home jurisdiction on dividends/profits repatriated from the Bahamas.

Apart from real estate, Brookfield's other investment interests target sectors such as infrastructure and renewable energy. Both have been priority focuses for the Bahamas in recent years, and the 'global asset manager's' presence on Paradise Island could be used to this nation's benefit in these industries.

"Everyone seems to be concerned about Brookfield," Mr Winder told Tribune Business. "It's more to the Bahamas advantage to have an investor like Brookfield, because of the amount of assets it has under administration for investment. It puts you in a position where you do not have to look for capital in the markets.

"From my perspective, this is the best thing that ever happened for the Bahamas. You have here an investor that has a huge amount of capital to deal with Atlantis's current and future needs."

Andrew Willis, Brookfield's spokesman, last week told Tribune Business that all decisions regarding capital investment and maintenance would be left to Kerzner International, which has signed long-term contracts to manage Atlantis and the One & Only Ocean Club.

Real estate accounts for $60 billion, or some 40 per cent, of Brookfield's worldwide assets. The company, which has a 100-year history, has expertise in hotel financing, as opposed to management and ownership, hence its common sense decision to retain Kerzner International as the management company.

The debt-for-equity swap, which involves Brookfield forgiving some $175 million worth of junior debt in return for taking over ownership of Atlantis and the One & Only Ocean Club, has been presented as the key deal in unlocking a solution to Kerzner International's $2.6 billion debt burden.

With that $175 million forgiven, and other creditors receiving a $100 million down payment on the sum owed to them, Kerzner International still owes $2.3 billion. Through last week's deal, Brookfield is effectively stepping into Kerzner's shoes and taking over negotiations with other creditors. US media reports suggested it is seeking a two-year extension to that debt's maturity.

Still, Mr Winder told Tribune Business that the key value driver at Atlantis, and what distinguished it and the Bahamas from elsewhere, was the quality of the guest experience and service delivered by the Bahamian staff.

"The differentiation for us in the Bahamas is that we, the citizens, the Bahamians that work at Atlantis, are the real drivers that help Atlantis retain its value," he explained. "As long as we give top-notch service and continue treating guests well, I think we should be OK.

"Any investor, as long as they generate returns from their investment, is going to make additional investments. As long as we are providing that kind of quality service that differentiates us from other jurisdictions, all investors will be happy with their returns."

Describing Brookfield as "a major player", Mr Winder added: "What has the Bahamas got from this deal? The Bahamas has not only got an investor in Atlantis, but it's a Canadian company and we've just signed a TIEA with them."

Asked about the potential opportunities Brookfield's interest in infrastructure and renewable energy might hold for the Bahamas, Mr Winder added: "The rationale is there to exploit those other opportunities you mentioned, because we're dealing with an institution that has significant investment dollars at its disposal.

"We in the Bahamas can clearly benefit from that. I'm not concerned. Yes, a small part of the debt has been converted to equity, but the reality is that you now have a deep pocketed investor, whereas before you had an investor relying on the capital markets to provide debt funding."

That model, Mr Winder suggested, had ultimately become unsustainable once the recession hit the financial performance of the Atlantis and One & Only Ocean Club, leaving them unable to generate enough free cash flow and profits to service the $2.6 billion debt.

Now, with Brookfield's presence on Paradise Island, "as opportunities become available you have an investor that can meet those needs".

"It's a win-win for the Bahamas because they have deep pockets, and a win-win because of all the other things they're involved with," Mr Winder added.

"The big driver is the value of the Bahamian people who work there, and the quality of staff at Atlantis...... At the end of the day, that will determine how valuable this investment will become in the future."