The billion pound battle for Claridge’s hotel from Belfast to Qatar | Business

As the Covid-19 pandemic hit London in the spring of 2020, the revolving doors at Claridge’s stopped turning and its art deco lobby fell silent.

The 220-year-old Mayfair luxury hotel, whose guests have ranged from Mick Jagger to Winston Churchill – and which was Queen Elizabeth II’s favorite lunch spot – has flouted government directives to close as part of efforts to stop the spread of the virus.

Like most hotel businesses, Claridge’s – and the Maybourne Hotel Group that owns it – have sought cash relief to fund wages for its waiters, porters and managers as the pandemic chokes business.

In total, the Maybourne entities, including Connaught, Berkeley and the yet-to-open Emory Hotel, claimed up to £12 million, according to records obtained by the Guardian.

Meanwhile, work continued on the quartet’s £800m refurbishment, including a luxury underground spa at Claridge’s, to boost the value of the jewel in the crown to its royal owners.

Maybourne is part of the growing empire of prestige properties owned by the apparently wealthy ruling elite of Qatar, the gas-rich emirate set to host the upcoming soccer World Cup.

Its ultimate beneficial owners are the former emir of Qatar Hamad bin Khalifa al-Thani, sometimes known as HBK, and the businessman and former prime minister Hamad bin Jassim bin Jaber al-Thani (HBJ), who together have established his investment Qatar in the UK. , including deals to buy Harrods and finance the Shard.

HBJ hit the headlines recently when the Sunday Times revealed he had given €3m (£2.6m), including cash stuffed in a Fortnum & Mason bag, to King Charles – then the Prince of Wales – for his charity. The cash was delivered in three batches between 2011 and 2015.

But that windfall, not to mention the money Al-Thanis saved by accepting the taxpayer’s license, is small beer compared to another prize now at stake.

Like most hotel businesses, Claridge’s has sought leave during the coronavirus pandemic. Photo: Jon Arnold Images Ltd/Alamy

Qatari aristocracy are embroiled in a multi-billion pound legal battle to overhaul Claridge’s at no expense. Now that fight is set to escalate, with troubled Swiss bank Credit Suisse becoming the latest entity to be drawn into a bitter feud between former friends.

The dispute revolves around the true value of Maybourne’s portfolio of luxury hotels and the impact that price has on the deal between Qatar and Paddy McKillen, a Belfast-born hotelier who has overseen the refurbishment.

The result of McKillen’s work has delighted critics. The penthouse suite, complete with a Steinway piano, is expected to fetch £100,000 a night when it opens later this year.

Claridge’s didn’t have a spa before, but McKillen’s builders put one in, digging a five-story excavation beneath the famous black-and-white lobby, sometimes by hand, to avoid any unusual rumbles disturbing returning guests after the pandemic. .

In the Japanese-inspired treatment rooms, guests enjoy floral kimonos instead of the usual robe and slippers. They can choose from an extensive menu of treatments or relax in a private cabana among the stone pillars surrounding the pool.

However peaceful the outcome of the transformation, the war for value created by it is likely to be long, costly and bitter, with one insider noting: “No one is going to win but the lawyers.”

A second source close to the dispute said the Qataris appeared prepared to spend “tens of millions” on legal fees, pitting their near-unmatched financial power against McKillen’s stomach for the fight.

This battle pits McKillen against his former friend and savior, HBJ.

The Belfast boy had acquired a stake of just over a third in the hotels in 2004 as part of a consortium led by Irish property investor Derek Quinlan.

When the financial crash toppled Quinlan’s property empire, the billionaire Barclay brothers swooped in and tried to wrest control of the hugely prestigious assets.

McKillen didn’t want to give up control without a fight, but ultimately he had a choice: either run up huge and dangerous levels of debt to buy out Barclays or recruit a wealthy backer.

In his place stepped HBJ, whose financial firepower dwarfed even that of Barclays. He bought out the brothers’ 64% stake and threw his weight behind McKillen, who possessed not only the other 36% but a wealth of valuable knowledge in how to run luxury hotels.

What happened next became the focus of a protracted and costly legal battle.

Under an agreement between the business partners, HBJ and HBK would increase their stake to 100%, clearing McKillen’s debts in the process and giving his firm, Hume Street Management Consultants, a lucrative seven-year contract to build the hotels to match the world. -exceeding the standards of luxury living expected by Qataris.

McKillen would get 36% of the resulting increase in the value of the hotels above the £1.3bn price tag set by Qatar’s initial investment, with deductions for the costs borne by the Gulf owners for the work. The deal seemed to work for everyone.

However, in April this year, it became clear that there was trouble in paradise.

McKillen and long-time partner Liam Cunningham have been ousted from the Maybourne Hotels board amid a row over his share of the hotels’ increased value.

McKillen is understood to be claiming the portfolio is worth more than £5bn, a nearly four-fold increase from 2015 which could see him earn seven figures.

The Qataris beg to differ, to the point that it is unclear whether McKillen will receive anything. Another point of difference is whether to include hotels in Beverly Hills and the French Riviera, which the Qataris say were added to the portfolio after their deal with McKillen. Factoring them out would increase McKillen’s payout.

Both sides say the contract between McKillen and the Qataris is clear and favors their own interpretation of the facts. Given how far apart the two sides are in their valuations – by a factor of 500% according to one source – a settlement seems unlikely.

One way to arrive at a valuation is to have an independent bank estimate the price. To that end, HBJ and HBK reportedly asked Credit Suisse to do the work.

However, an arbitration process, expected to start within days, is expected to examine whether the Swiss bank can really be considered independent.

Qatar Holding, the Gulf state’s investment vehicle, owns 5% of Credit Suisse. HBJ’s son Jassim bin Hamad is a former director of the bank, although he resigned in 2017. Credit Suisse declined to comment.

While the legal process plays out, HBJ can be relieved to have full control of London’s most prestigious hotels, with the possible exception of the Ritz and Savoy, which happen to be wholly or partly owned by Qatar or its ruling elite.

A clock is seen near the logo of Swiss bank Credit Suisse in Zurich
Qatar Holding owns 5% of Credit Suisse. Photo: Arnd Wiegmann/Reuters

Shortly before McKillen was ousted, HBJ installed several new board members.

Among them is his son Mohammed bin Hamad bin Jassim and his right-hand man, Italian banker Michele Faisola, who was recently acquitted on appeal after serving a prison sentence in an investigation into the falsification of accounts at Italy’s Monte bank. dei Paschi di Siena in 2019.

Faissola, head of HBJ’s family office Dilmon, is said to be a key figure at 67 Brook Street, a former home of the Bee Gees that has become the London nerve center for HBJ’s many business interests in Britain – and in distance of breath from Claridge’s.

Many of the guests enjoying Claridge’s gracious and peaceful surroundings will be blissfully unaware that their bed for the night is the subject of such an unsavory and bitter row.

As for the 210-year-old hotel and its staff, they’ve certainly seen it all.

McKillen declined to comment. Maybourne Hotels and its owners did not respond to a request for comment.

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