Citywest receiver launches legal action over stalled €30m deal

The €30 million receivership sale of Ireland’s largest hotel to a secretive offshore fund has descended into a

High Court

legal battle after the buyer

failed to close the deal last Friday.

Martin Ferris, the Bank of Scotland (Ireland)-appointed receiver to Citywest complex, has filed a lawsuit against a company owned by BSQ Investments, which agreed to buy the 789-bed hotel and conference complex in October.

He claims BSQ, which is linked to UK-based Irish former banker Tony Lynam, did not meet a final deadline of last Friday set by the receiver to pay the balance owed on the sale. The deal was originally supposed to close in mid-December.

Bidders
At least two other prospective bidders are now examining whether to revive their interest in Citywest, following the stalling of the BSQ deal.

It is understood that one of these is Brehon Capital Partners. Brehon, in conjunction with Swiss investor Midwest, owns the Marker hotel in Dublin and the Powerscourt hotel in Wicklow, formerly the Ritz Carlton. Brehon was unavailable for comment yesterday.

The other prospective bidder is linked to a well-known southern US operator of large- scale music venues and hotels. It had originally expressed an interest in buying Citywest last year, before BSQ signed its contract, with a view to turning the complex into a live music-themed venue.

BSQ handed over a deposit of about €3 million when it exchanged contracts to buy Citywest. The Irish entity it set up to buy the hotel, CW Hotel Investments 2013, is now being sued by HSS, the development company, now in receivership, founded by the late developer Jim Mansfield.

The receiver is seeking to compel CW to close the deal. CW is also being sued by Mr Ferris personally in his capacity as the receiver; Jeffel, another company in receivership linked to HSS; Rattler, a company controlled by Mr Ferris that was used to complete a land transaction involving Citywest, and the hotel's operating company, Citywest Resort.

BSQ Investments is a Swiss- based fund linked to Celtic Global Real Estate, whose directors include Mr Lynam and Australian businessman David Risbey, a resident of Monaco. BSQ Investments is ultimately owned by an entity registered in the Caribbean offshore haven the British Virgin Islands.

According to several sources, BSQ's proposal is to finance the Citywest deal with cash from private investors from Asia and also Lebanon.

When CW Hotel Investments was set up last October, its directors briefly included a British-Lebanese businessman, Fadi Gemayel. Mr Gemayel is involved in several hotel investments in Britain, alongside Chinese and Hong Kong-based investors. He could not be reached for comment yesterday.

Mr Lynam previously led a 2009 bid to buy Southhampton football club out of administration on behalf of private investors. It was in exclusive negotiations to buy the club, but the deal fell through after his backers walked away.

He was unavailable for comment yesterday.

Sources close to BSQ insisted the plan remained for it to close the deal to buy Citywest.

Flotation
The hotel is currently being run for the receiver by Dalata, Ireland's largest hotel company, run by former Jurys boss Pat McCann. It is gearing up for a flotation later this month. Mr McCann is also a director of Citywest Resort, one of the entities suing BSQ.

Dalata had expected to hand over control of Citywest this month to UK company Michels & Taylor, the operator selected by BSQ. Dalata says it will continue to run Citywest until it is sold by the receiver.

Several sources speculated that Dalata might mount its own bid to buy Citywest, using some of the proceeds of its flotation. The company is also considering operating it for a new owner, should the opportunity arise.

Whoever buys Citywest will also have to deal with a group of disgruntled creditors who are owed money for building work at the complex. They are claiming to have rights over materials contained within the conference centre, although those claims have yet to be independently validated.