The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sir Franklyn Wilson says there is “a high possibility” that Atlantis may undergo a change in ownership in 2019, describing this as a “significant” investment boost for The Bahamas.

The Arawak Homes chairman, in an interview with Tribune Business, said he had obtained information that The Bahamas’ prime mega resort may soon be in new hands and receiving a “major injection of capital” to ensure it remains competitive with rival Baha Mar.

Sir Franklyn did not disclose his information source, nor did he identify any potential new buyer or the rationale that current owner, Brookfield Asset Management, would have for exiting now after holding the Paradise Island property for almost seven years.

Ed Fields, Atlantis’ senior vice-president of public affairs, could not be reached for comment last night. His office phone voice mail said he was away until January 7, 2018.

However, Sir Franklyn said the predicted Atlantis ownership change was one of three forces that could drive New Providence’s economy towards increased growth in 2019.

Besides Baha Mar’s continued investment, and potential development of a water park at the old Crystal Palace hotel site, the prominent businessman revealed that the Nancy Oakes estate had also sold some of its land in the Clifton area. While not disclosing the purported buyer’s identity, he described them as “well known to the Bahamian people”.

“I understand there’s a high possibility of a change in ownership at Atlantis, and that will be a significant event for the country,” Sir Franklyn told Tribune Business.

“My understanding is a significant part of what makes that a good situation is a new investor coming in will appreciate they have to keep the property competitive with Baha Mar, and will have to step up what it has to offer. That requires a significant injection of capital.”

There have been no outward signs, though, that Brookfield has any desire to sell Atlantis, which it acquired from Kerzner International in an early 2012 debt-for-equity swap. Realising that the resort’s product constantly needs to be refreshed, the Canadian-headquartered asset manager has maintained Kerzner’s policy of frequent annual capital upgrades.

Brookfield has also twice refinanced Atlantis’ debt, the last transaction occurring in mid-2018, and previously sold the Ocean Club to Len Blavatnik’s Access Industries to raise principal to pay down that debt.

Morningstar Credit Ratings, the investment analysis firm which assigned the highest ‘triple-A’ rating to the most senior financing tranches in Atlantis’s last $1.85bn refinancing, revealed in a July 2018 report that the resort “feels strongly” that Baha Mar’s emergence will not impact its long-term performance after net operating income jumped 27 percent for the 2018 first quarter.

“Management feels strongly that Atlantis will maintain its operating performance on a long-term basis given the resort’s brand affiliation with Marriott’s Autograph Collection; the property’s superior overall amenities and activities package; increased airlift capacity at LPIA; and the potential to increase visitation by cruise ship passengers,” Morningstar wrote.

“Management also shared financial information which shows that despite the opening of Baha Mar and additional displacement of rooms down for renovation at Atlantis, net operating income at the property increased by approximately 26.6 percent ($10.4 million) in the first quarter of 2018 as compared to the first quarter of 2017.”

Morningstar added that Atlantis’s annual net operating income had increased by 22 per cent, or almost $30 million, in the six years since Brookfield replaced Kerzner International as the Paradise Island resort’s owner.

“Since the sponsor [Brookfield] took ownership of the property it has invested approximately $213 million in capital improvements, which have contributed to the increase in the property’s net operating income from approximately $133.2 million in 2012 to approximately $162.6 million as of the trailing 12-month period ending March 2018,” the analyst’s report said.

“Notable projects include a soft goods renovation at The Cove and The Beach [Towers], a casino renovation including a high-limit gaming salon, new restaurants, lobby refurbishments, and pool renovations including the addition of new cabanas and daybeds.

“From 2016 to 2017, [Brookfield] invested approximately $25.4 million ($40,448 per room) on a comprehensive renovation of the Coral [Towers]. The renovation was completed, and all rooms have returned to full operation as of June 2018. [Brookfield] has budgeted approximately $8 million (approximately $32,000 per room) for a 2018 renovation of approximately 250 rooms at The Royal Towers, which will include a replacement of both soft and case goods.”

Atlantis is effectively the “crown jewel” in Brookfield’s resort and hospitality holdings, which come under the asset manager’s Brookfield Property Partners portfolio.

Still, resort and hospitality holdings do not appear to be a core business for Brookfield, which administers/manages some $330bn of worldwide assets. It recently disposed of its interest in the Hard Rock Hotel and Casino in Las Vegas, and concentrates more on office and retail properties, engaging in regular buying and selling of high-end commercial real estate.

Sir Franklyn, meanwhile, praised Atlantis’s $4.2bn Cable Beach rival, saying: “I remain convinced that Baha Mar will prove to be an economic force that keeps contributing, and that there will be significant capital expansion works at Baha Mar.

“The prospect of having real, substantial capital upgrades at Atlantis and Baha Mar will be very material and very significant for the country.”

Further bolstering his optimism for New Providence’s 2019 economic outlook, the Arawak Homes chairman added: “I understand there’s been a recent change in ownership at the Oakes property at Clifton. I understand the new owner is well-known to the people of The Bahamas and has some ambitious plans for that.

“These are three specific things I think offer increased prospects for Grand Bahama.”