Kerzner Tweaks Atlantis Plans

Luxury resort company

Kerzner International

(KZL)

has rejiggered expansion plans for its flagship Atlantis resort in the Bahamas.

The company breaks ground Wednesday on the third phase of the ocean-themed resort. Instead of an originally planned 1,500-room hotel tower, however, the expansion will include a 600-unit all-suite luxury hotel and a 400-room condominium-hotel. Kerzner said it has received government permission for the change in plans.

In a conference call, Butch Kerzner, the company's chief executive, said the all-suite hotel is aimed at customers who have expressed interest in larger rooms than are currently available at Atlantis. "We see a gaping hole in the market that we have not been able to cater to," he said.

Kerzner will develop the 400-room condominium-hotel as a joint venture with U.S. real estate developer Turnberry Associates. Condominium owners will be able to use the units up to three months a year. The rest of the time, the units will be part of a rental pool managed by Kerzner in exchange for a 50% to 60% revenue cut.

Other, previously announced pieces of the Atlantis expansion are unchanged, including beefing up the resort's convention space, casino and water-park attractions, Kerzner said.

The company expects to spend $650 million on the all-suite hotel and other resort improvements, less than the $800 million forecast under the previous plan. The joint venture's total cost for the condominium-hotel will be about $200 million, although it will be financed at least in part through condominium presales.

Kerzner executives said the all-suite hotel will likely generate about $100 million in annual EBITDA (earnings before interest, taxes, depreciation and amortization). That's less than the $110 million to $120 million forecast for the originally planned hotel tower, but the new forecast doesn't include contributions from the condominium-hotel, the executives said.

The company expects to complete the all-suite hotel by December 2006 and the condominium-hotel during 2007.

Kerzner shares were off 10 cents, or 0.2%, at $56.74.