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Updated: Brookfield Prepares to Refinance Atlantis Resort in the Bahamas

New CMBS Financing Would Help Pay Off $1 Billion in Outstanding Debt
July 9, 2018
Atlantis Hotel & Casino Resort Photo credit: Brookfield Property Partners

Brookfield Asset Management is on the verge of refinancing its sprawling Atlantis Hotel & Casino Resort in the Bahamas.

The New York- and Toronto-based investment firm is set to pay off $1 billion in loans in commercial mortgage-backed securities any day now on the resort.

Moreover, in keeping with the recent trend of investors in trophy lodging properties turning to the commercial mortgage-backed market, new financing from Citigroup will be rolled into a new bond offering.

Commercial mortgage-backed securities originators have shown an increasing appetite in the past few quarters for re-underwriting maturing deals and lending on the purchase of comparable higher-quality assets. This year, issuers have offered 18 single-asset or single-borrower commercial mortgage-backed securities deals totaling more than $9.1 billion backing lodging properties, about 40 percent of single-borrower deals this year, according to CoStar tracking.

Atlantis Resort, a 2,917-room, luxury resort located on Paradise Island just off the coast of Nassau 180 miles from Miami appeared in the 2006 James Bond movie Casino Royale.

The property contains four hotel towers including Beach Tower (423 rooms), Coral Towers (693 rooms), Royal Towers (1,201 rooms), and The Cove Atlantis (600 rooms). The site includes two additional buildings that are not part of the collateral, the Reef Atlantis, a 495-room luxury condo hotel, and Harborside Resort, a 392-room timeshare.

The property features a 141-acre water park, 39 restaurants and bars, a 60,000-square-foot casino, 458,000 square feet of meeting and conference space, 73,391 square feet of retail and spa space, a fitness center, a kid’s club, three beaches, dolphin and sea-lion attractions and marine exhibits, and a 63-slip marina.

The property produced more than $200 million in net operating income in each 2016 and 2017, according to a Morningstar analysis of the new CMBS.

The property is collateral for a $1 billion, 2014 commercial mortgage-backed securities deal. That mortgage is divided into two components that require monthly interest-only payments: a $650 million seven-year fixed rate component and a $350 million floating rate component. The financing of the property includes five mezzanine loans totaling $700 million that are secured by the equity interests in the borrower.

The floating rate component had an initial three-year term with four, one-year extension options. The floating rate component matures in July 2018 and has three, one-year extension options remaining.

The fixed-rate component was expected to be repaid in full early this month, according to Kroll Bond Rating Agency, which upgraded several classes of the bond offering this week because of the pending payoff.

In addition, the loan servicer has indicated to KBRA the floating rate certificates will also be repaid at the end of this month.

Meanwhile, Citigroup Commercial Mortgage Securities has filed preliminary paperwork for a new $1.2 billion commercial mortgage-backed securities bond offering that will have backing from a single loan from Citi Real Estate Funding on the resort. The amount has not been disclosed.

The property produced more than $200 million in net operating income in each 2016 and 2017, according to a Morningstar analysis of the new CMBS. In fact, it has produced more NOI in each of those years than what Brookfield paid for it in 2012.

Brookfield took ownership of the property in April 2012 when it entered into an assignment in lieu of foreclosure with the previous owner, Kerzner International, and the other previous lenders, and exchanged its $175 million B note for a 100 percent ownership interest in the poroperty and the Bahamas One & Only Ocean Club as well as a 50 percent ownership interest in the One & Only Palmilla resort in Mexico.

Brookfield officials did not respond to emails and phone calls requesting additional information.

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