JOHANNESBURG – To appreciate Sol Kerzner’s loss in transactions with the Canadian property company Brookfield last week, you have to have visited Atlantis in the Bahamas.
In my former life as a PR man, Sol once asked me to come over for a couple of days to discuss a problem. Having seen the Lost Palace at Sun City, I was expecting something spectacular but nothing could have prepared me for the reality.
The hotel and casino, set off by the azure Caribbean, is a very much enlarged Palace at Sun City. That means it is huge and designed to take the breath away, even if it is showy and bright in a tasteless way, which is how tourists on the visiting cruise liners like it.
There are 2 300 rooms. Few visitors make use of the real sea. They prefer the world’s most stupendous water playground with artificial waves and slides hundreds of feet high.
A bridge connects the two main towers of the hotel. In that, are the what were the world’s most expensive suites at $25 000 a day.
But the really dumbfounding thing about Atlantis is its super-aquarium, spreading over 60ha. You can virtually “walk under the sea”, watching hundreds of aquatic species glide around – sharks, swordfishes, turtles, barracudas, rays.
There are clusters of dozens of crayfish scuttling around the sand, which is a bit disconcerting when you are eating one of their cousins in the “undersea” restaurant.
At the launch back in 1998, the Queen of Squeak, Michael Jackson, was supported by Gloria Estefan. Most the modern musicians of whom I have never heard, such as Jonas Bros, Taylor Swift, N Synch, Ricky Martin and Sheryl Crow, have performed there. Numerous movies have been shot on the premises, including the James Bond movie Casino Royale.
I haven’t visited Atlantis in Dubai but it is apparently a replica not much smaller – 1 500 rooms and a bridge room at £2 500 a day, trumping even the Paradise Island room rate. Oprah Winfrey missed the opening in 2008 because fires in California were threatening her house – but Kylie Minogue was there, as were Sir Richard Branson, Janet Jackson and Charlize Theron.
That enormous property did not slip out of Sol’s fingers to Brookfield. It was owned by the oil sheiks already.
Two of the One & Only hotels have also gone to Brookfield, one in the Bahamas and the other in Mexico. Five of these resorts, designed to pamper oil sheiks and movie stars, are still owned. The capital cost of just the Cape Town resort is reported to have been R1bn
Sol parted with these assets for the paltry sum of $175m. Even his PR lady in New York had to admit that derisory for assets that cost billions.
The catch was that the buyer had to take over $2.3bn of debt. But even taking that into account, it was a steal for the $150bn asset management and property group. The replacement cost of those assets would be a multiple even of the debt incurred.
But for them to assume real value, Atlantis has to start pumping again. And that is quite an ask at the present juncture of economic history.
So how did Sol get into a debt bind? It goes back to 2005, when Sol and Butch decided to buy out the minority and delist the company from the New York Stock Exchange. In that process, they incurred $3.6bn of debt – just before the Great Crash of 2007.
Sol’s view is ostensibly that all’s well. It is a seamless process that does not affect guests at all. The company has changed from an owner to a manager of resorts. He’s back doing what he does best – designing, developing and managing sumptuous resorts, “blowing the customer away”. Nowhere in the announcements is there any acknowledgement of a setback.
Of course his loss this week was not a hundredth of the loss he suffered when his son and business partner Butch died in a helicopter accident in the Dominican Republic five years ago.
Amazingly, Sol wants to carry on. After losses like these, how does he do it? He is 77 but, according to colleagues, is as driven as ever. After his fourth divorce, he has six surviving children but they are apparently not the incentive. Working, says a colleague, is what Sol does.
Kerzner always ingratiated himself to the powers that be in the territories in which he operated, in SA the Transkei, Ciskei and Bophuthatswana governments loved him. They have gone and, after dismantling the bantustans, the ANC has not continued the sense of gratitude.
So it was with the Mohegan Indian tribe in Connecticut, whose Mohegan Sun has been America’s most prosperous casino resort. There’s a problem there, in that Kerzner sold out of the venture for a share of profits until 2014. According to Forbes, the Mohegan tribe is less than thrilled that while he was receiving dividends, Kerzner recently invested in a big new property that will compete with the Mohegan Sun.
The Tribune, a Bahamian newspaper, paid high tribute to “Sir Sol” this week. It said that Kerzner’s Atlantis had single-handedly put the island on the tourist map, let alone generated 4 500 jobs directly and many more indirectly.
It reported Kerzner International “has a deep love and affection for the Bahamas, fully appreciating the role that their properties played in its economic health and the wellbeing of his people
“Brookfiield”, it feared, “has none of these qualities.”