April 04, 2012--The Fontainebleau Miami Beach brings in about $800,000 every day, or roughly $9 in revenue every second.

That sort of sales clip, disclosed in a new credit report, helps explain why South Florida's largest resort is one the verge of borrowing nearly $600 million as it retires its past financial woes and reaps the benefits of the region's booming tourism market.

"It's an impressive story,'' said Sheila Bjornstad, an analyst with Morningstar Credit Ratings LLC who helped write the report on the Fontainebleau's planned debt sale to Wall Street investors.

The report, released Tuesday afternoon, concludes the Fontainebleau made about $80 million in profit off of $296 million in revenue it generated during the 12 months that ended in March, the peak of South Florida's tourism season. Morningstar said the cash is more than enough to cover a new loan, which will be used to retire existing debt that comes due this summer.

The 1,500-room resort that once publicly discussed bankruptcy proceedings now is impressing analysts with rapid profit growth and one of the most lucrative nightclubs in the country. LIV generated about $40 million in revenue last year, accounting for 14 cents of every dollar the Fontainebleau makes. That's particularly good news for nightclub impresario David Grutman, who operates LIV under a seven-year management contract that gives his company 5 percent of LIV's revenue, plus 10 percent of the profit, Morningstar said.

Nearly four years after finishing a $700 million renovation in the midst of a global financial crisis, South Florida's largest resort appears to be enjoying life in the recovery. Revenues jumped 27 percent between 2010 and 2011, and profits soared 74 percent to $75 million.

Fontainebleau executives plan to sell $412 million worth of five-year bonds to Wall Street investors at an interest rate of about 3.4 percent, plus borrow another $168 million from private investors at a rate of 9 percent. Fontainebleau is only required to make interest payments on the debt, meaning it will have to make a similar loan again in 2017 or find another way to raise the cash and pay off the lenders.

Hotels across the region have been on a rebound after a sharp fall during the recession. Hotel taxes in Miami-Dade were plunging by 20 percent a month during 2009, but now are back to record levels. The downturn imperiled the Fontainebleau, which was counting on business from large corporate groups that all but vanished in the wake of a financial crisis and backlash against lavish spending.

In the spring of 2008, owner Jeffrey Soffer sold half of the Fontainebleau to a subsidiary of Dubai's investment arm, Nakheel Hotels. By the time the resort's two-year renovation was completed in the fall of 2008, contractors claimed more than $60 million in unpaid bills and eventually settled for much smaller amounts after lengthy court fights. A year later, with construction debt due and a sister project in Nevada falling apart, Soffer and Nakheel publicly discussed the possibility of Fontainebleau Miami Beach filing for bankruptcy protection.

The Morningstar analysis notes Soffer still faces lawsuits related to the failed Fontainebleau Las Vegas project, which Soffer lost in a bankruptcy proceeding. Soffer could not be reached for comment Tuesday afternoon, and a Fontainebleau spokeswoman said hotel executives were not available for interviews.

Last year, the Fontainebleau rented 79 percent of its rooms at an average rate of $276 a night. That's well above the average hotel in Miami-Dade, which hit 75 percent occupancy last year at $152 a night, according to Smith Travel Research. Among competitors, the Fontainebleau holds its own: Morningstar cited an unnamed "competitive set'' of nearby hotels, where the average occupancy was 75 percent and the average rate $273.

The report also sheds light on the Fontainebleau's pursuit of a casino on the shores of Miami Beach. Morningstar said the Fontainebleau's loan allows the hotel to build a casino if Florida changes its gambling laws, and the hotel would convert a ballroom into gambling space. The report notes such a change could hurt the Fontainebleau's appeal with conventions and meetings -- currently 50 percent of the resort's bookings-- but would also prove a windfall for tourist dollars.

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