Atlantis plans to invest around $135m over the next three years in a near-total overhaul of its Cove resort despite a modest fall in revenue per available room (RevPAR), it was revealed yesterday.

Analysts at DBRS Morningstar, in evaluating the creditworthiness of mortgage-backed securities that underpin the latest refinancing of the Paradise Island mega resort’s debt, disclosed that the hotel and its owner, Brookfield Asset Management, invested more than half-a-billion dollars in refreshing multiple aspects of its product and guest experience.

The anticipated Cove improvements thus appear to be one of the biggest capital expenditures that Atlantis will have undertaken over the past ten to 15 years. The outlay comes after “strong performance since COVID-19” with RevPAR, despite a slight year-over-year decline of 2.2 percent for the 12 months to end-May 2025, still some $49 ahead of pre-pandemic levels for the entire resort.

RevPAR is a key indicator of hotel pricing power and visitor demand, as its measures yields from available room inventory. Morningstar attributed the decline from a peak of $274 in 2023, down to the present $260, on “the phasing out of pent-up transient demand” from leisure visitors that built up due to the COVID-related travel restrictions and lockdowns imposed from 2020 to early 2022.

The mortgage-backed securities, which are divided into five classes, attracted credit ratings ranging from ‘AAA’ to ‘BBB’, are secured against the collateral provided by certain Atlantis real estate assets. Morningstar said it holds “a positive view” on the debt security given the mega resort’s “ownership history” and performance.

However, it added that it expects Atlantis’ RevPAR to moderate further and settle at a “sustainable” $256, which is just $4 below what was achieved for the 12 months to end-May 2025. The present $260 RevPAR is some $14, or 94.9 percent, below the 2023 peak but still 23.2 percent ahead of the $211 achieved in 2019 prior to COVID.

“The property has demonstrated strong performance since the COVID-19 pandemic. In 2019, prior to the pandemic, the collateral reported an occupancy rate of 71.2 percent and an average daily rate of $296, resulting in revenue per available room (RevPAR) of $211,” Morningstar said.

“The property exhibited performance disruptions stemming from the pandemic from 2020 to 2022, with achieved RevPAR of $44, $118 and $213, respectively. While the collateral realised a 79.1 percent reduction in RevPAR from 2019 to 2020, the property’s performance continued to struggle in 2021 as a result of international travel restrictions, with a year-end 2021 RevPAR of $118, representing a 43.9 percent reduction in RevPAR compared with year-end 2019.

“Despite pandemic disruptions persisting into 2022, the property achieved a year-end 2022 RevPAR of $213, an 80.1 percent increase between 2021 and 2022 and a 1 percent increase from year-end  2019 figures. RevPAR subsequently increased rapidly in 2023 to $274, a 29.8 percent increase from the year-end 2019 RevPAR before decreasing 2.8 percent to $266 RevPAR in 2024.”

Turning to the present, Morningstar’s report said: “As of the trailing 12-month period ended May 31, 2025, RevPAR declined an additional 2.2 percent to $260 from the 2024 achieved RevPAR. Morningstar believes this normalisation of RevPAR is due to the phasing out of pent-up transient demand witnessed in 2022 and 2023 following the removal of pandemic-related travel restrictions.

“Morningstar expects moderate RevPAR growth in the future because of the subject property’s desirable location, recently completed capital improvements, contemplated future capital improvements, and diversified amenities and offerings. Morningstar concluded to a sustainable RevPAR figure of $256, which is 1.4 percent below the RevPAR figure as of the trailing 12-month period ended May 31, 2025.”

As for Atlantis’ planned capital works, Morningstar said: “Between 2012 and 2024, the sponsor spent approximately $519.3m across the resort to renovate hotel rooms, lobbies, food and beverage offerings, and the casino, among other improvements.

“Between 2025 and 2027, the borrower plans to renovated the guest rooms, pool deck and public areas at the Cove hotel tower with an anticipated capital expenditure spend of $135m. This translates into the equivalent of $225,000 per key.”

Among the assets upon which the mortgage-backed securities are secured is the Coral Towers, which Atlantis last week confirmed is set to close from August 17 for what could be an eight-week period. “The transaction is secured by the borrowers’ fee-simple interest in Atlantis, a luxury beachfront resort comprising 3,317 keys, of which 2,430 keys - 73.3 percent of total keys - are collateral for the transaction,” Morningstar said.

“Morningstar has a positive view of the collateral considering its ownership history, capital expenditure history, prime beachfront location and strong post-pandemic recovery, as well as the significant historical and ongoing capital investments to be made at the property...

“The hotel keys that serve as collateral for the loan represent 73.3 percent of the total units and are in the Coral, the Royal, and The Cove. The 887 condominium hotel units that are not included in the collateral consist of timeshares and condominiums owned by guests at The Reef and Harborside, which contain 495 units and 392 units, respectively. However, these are part of a revenue sharing programme with the resort, which will be included as collateral.”

Detailing Atlantis’ various amenities, Morningstar said these included the 41-acre Aquaventure water park; recently renovated 60,000 square foot casino; a 63-slip marina; a fitness centre equipped with a four-lane pool, six tennis courts and personal trainers; a movie theatre; 11 swimming pools; over 40 restaurants and bars; and 35,000 square feet of leased retail to over 68 international brands.

The mortgage securities will be issued by an entity called the BHMS Commercial Mortgage Trust 2025-ATLS, with BHMS and ATLS likely standing for Bahamas and Atlantis.