Dubai buys Kerzner's Atlantis stake

Kerzner International Resorts has sold has its 50 per cent stake in Atlantis The Palm in Dubai to the hotel's co-owner Istithmar World for US$250 million (Dh918.2m) as part of Kerzner's debt restructuring.

The Atlantis The Palm in Dubai. Sarah Dea/ The National
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Kerzner International Holdings has sold has its 50 per cent stake in Atlantis The Palm in Dubai to the hotel's co-owner Istithmar World for US$250 million (Dh918.2m) as part of Kerzner's debt restructuring.

Istithmar, part of Dubai World, is now the sole owner of the resort, which cost $1.5 billion to develop.

"The performance of the Atlantis continues to exceed our expectations," said Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai World, adding that the deal was in line with a strategy of "investing selectively where growth opportunities exist".

He described the hotel as one of the conglomerate's best-performing assets.

Atlantis is one of Dubai's flagship resorts. With more than 1,500 rooms, a water park and 18 restaurants, it is Dubai's biggest hotel.

The property, developed in a partnership between Istithmar and Kerzner, opened towards the end of 2008 with a lavish party that received global attention and attracted celebrities including Robert De Niro, while Kylie Minogue performed at the event.

This was just as the global financial crisis was starting to spread to the emirate, and hotel profitability subsequently declined sharply over the subsequent two years.

Kerzner, which owns the Atlantis brand, is to continue managing the hotel, the companies said.

The proceeds from the sale "have been used to reduce Kerzner's operating company indebtedness", Kerzner said.

Dubai World completed a restructuring for $24.9bn of debt last year. Hotel performances have picked up in the emirate recently, with room rates and occupancy levels growing this year.

Figures from STR Global reported by Jones Lang LaSalle, a property consultancy, show that occupancy levels in Dubai increased by 4 percentage points to 86 per cent in the first two months of the year compared with the same months last year, while average rates are up 9 per cent.

"Since its opening, Atlantis The Palm has become a major icon, an anchor of the family leisure image of Dubai in general and the Palm Jumeirah in particular, both on a regional and global level," said Chiheb ben Mahmoud, the head of hotel advisory at Jones Lang LaSalle Hotels, Middle East and Africa.

"This acquisition confirms the strategic nature of the resort and the role it plays for Dubai as a destination."

Improved hotel performance in Dubai has been helped by a variety of factors, including unrest elsewhere in the region and airlines opening up routes to new markets and its relative affordability, which have helped bring in more tourists from eastern Europe, India and South America.

Brookfield Asset Management, meanwhile, has taken over Kerzner's ownership interests in the Bahamas, which are comprised of the Atlantis Paradise Island, its flagship resort, and the One&Only Ocean Club. Under this deal, Brookfield is to write off $175m of debt.

Kerzner has indicated it planned to focus on managing resorts rather than owning the property assets as well.

"We are pleased to have reached a successful conclusion to our comprehensive restructuring, which significantly strengthens the company's financial profile," said Sol Kerzner, the chairman of Kerzner International.

"With substantially less debt and a more flexible operating structure, Kerzner is well positioned for sustainable long-term growth as a global management company."

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