Hotel operator Kerzner International Holdings Ltd. was buried under a mountain of debt when its luxury projects ran into trouble during the financial crisis. Now, it is attempting a comeback with a colossal resort on the "Hawaii of China," backed by a leading Chinese investor.
Kerzner, known for giant developments such as Sun City in South Africa and Atlantis in the Bahamas, is expected to announce Thursday that it has reached an agreement with Chinese conglomerate Fosun International Ltd. to build a $1.5 billion Atlantis resort on Hainan Island in the South China Sea, according to both companies.
The 153-acre property in the city of Sanya will include 1,300 hotel rooms, 18 bars and restaurants, a water park, dolphin shows and other marine life. Groundbreaking is to start this year, and the resort is to be completed in 2016.
Fosun is led by Guo Guangchang, who calls himself a disciple of famed investor Warren Buffett, chairman and co-founder. His company has about $28 billion in assets, making it the largest privately owned Chinese conglomerate. "Fosun has all the funds ready to build this project successfully," Mr. Guo said in an interview.
Along with a partner, Fosun made an offer earlier this year to buy French resort company Club Méditerranée SA for $729 million that is awaiting shareholder approval. Club Med has two resorts in China and is planning to open three more by the end of 2015.
Leisure travel is expanding in China faster than in Europe, experts say. In previous years, affluent Chinese liked to boast of how many new places abroad they had seen, Mr. Guo said. "Now, many Chinese people like to have a good time in one place."
The China project represents a second chance for Kerzner's 78-year old founder and chairman, Sol Kerzner, and it marks a sharp break from the company's past. Before the downturn, the hotel operator had borrowed heavily for stakes in projects it later had to sell or turn over to lenders, including giant Atlantis resorts in the Bahamas and Dubai. Last year, such property sales helped Kerzner complete a debt restructuring.
Kerzner says the China project is part of its new approach of keeping its name off the property deeds. The hotel operator will manage the resort, while its deep-pocketed Chinese partner is putting up all the capital and owning the real estate.
"We are focusing on managing hotels," said Alan Leibman, Kerzner's chief executive.
The strategy of operating or franchising instead of owning hotels has become increasingly popular. Managing hotels rather than owning them means tying up less capital and taking on less debt, analysts say.
Mr. Kerzner, a South African native, launched his hospitality career in 1962. In the following years, he developed Sun City, which includes hotels, a man-made lake, golf courses and a 6,000-seat arena where Frank Sinatra sang.
In 1996, he opened the Mohegan Sun casino in Uncasville, Conn., partnering with an Indian tribe, and a few years later started a brand of boutique luxury resorts called One&Only in the Bahamas, Mexico and other destinations.
His firm bought the 2,300-room Paradise Island Resort in the Bahamas out of bankruptcy protection in 1994. He turned it into his first Atlantis, with 1,150 additional hotel rooms, and opened restaurants featuring celebrity chefs such as Jean-Georges Vongerichten.
Mr. Kerzner and his son Butch Kerzner, then-chief executive, took the company private in 2006 through a roughly $3 billion transaction, with Goldman Sachs Group Inc. and Colony Capital LLC, among others, coming in as partners. That same year, Butch Kerzner died in a helicopter crash.
Kerzner opened a second Atlantis in partnership with the Dubai government in 2008, just as the financial crisis was about to boil over. The company sold its 50% stake in Dubai Atlantis to a Dubai government fund for $250 million last year, part of the process of reducing Kerzner's debt to $120 million from $500 million.
Separately, with $2.5 billion of debt on the Atlantis Bahamas resort, the company that year turned the property over to Brookfield Asset Management Inc., one of the lenders. Kerzner continues to manage both resorts.
Source: Wall Street Journal by Craig Karmin
from China Travel & Tourism News http://www.chinatraveltourismnews.com/
Put the internet to work for you.
No comments:
Post a Comment