Investors won't pay out for completion of hotel

The investors due to buy the Four Seasons Hotel in Ballsbridge, Dublin, have ruled out making a financial contribution towards completing the building. The construction of the five-star hotel is running hugely over budget and the final cost may be £70 million (€89 million), compared to the initial target of £51 million. To date all the money spent on the hotel is understood to have come from four banks involved in backing the project.

The investors set to buy the hotel, most of whom are barristers, have a contract to buy it for £60 million once it is completed.

The investors may benefit from the fact that the construction costs have exceeded expectations. They are likely to receive tax benefits on the entire capital amount spent on constructing the hotel, even though they may purchase it for significantly less than that.

Who will fund the shortfall between the purchase price and the actual cost of building the hotel is not yet clear, and this will be one of the main issues to be addressed by Mr Pearse Farrell, of Farrell Grant Sparks, who has been appointed receiver to the developers. The decision to appoint Mr Farrell was taken by the bank consortium late on Wednesday night by a majority vote.

ACCBank, the lead bank in the consortium, Anglo Irish Bank, which is also heavily involved, and Scotia Bank, are understood to have voted for the appointment. The fourth bank involved, Bank of Scotland (Ireland) Ltd (formerly known as Equity Bank), is understood to have been against the appointment.

Mr Farrell was appointed receiver to Simmonscourt Holdings Ltd and Harvard Properties Ltd, two companies involved in the development of the exclusive, 259-room hotel. The former chairman of ACCBank, Mr Dan McGing, and financial adviser Mr Barry Kenny are directors of Harvard. Dublin real estate agent Mr Sean Dillon is on the board of Simmonscourt, along with two US businessmen, Mr Robert Radovan and Mr William Criswell.

"The receiver's sole focus will be to restructure the operation to ensure the hotel's completion under the management of Four Seasons Hotels before the end of the year," according to a statement issued on Mr Farrell's behalf yesterday. The original opening date for the hotel was February of this year.

Mr John Brennan, general manager of the Four Seasons in Dublin, said the multinational group remained "totally committed" to the property and was "working both with the receiver and the ultimate ownership group to bring the quickest conclusion to this process. "The ownership group, which has contracted to purchase the hotel upon completion, is equally committed to the project and to their ongoing relationship with Four Seasons," Mr Brennan added.

Sources speculated that Mr Farrell would try to get the investors and possibly the Four Seasons group to help fund the hotel's completion. However, a spokesman for the investors said a contract existed whereby the investors would buy the completed hotel for £60 million and that was all that would be paid.

"The reality is that the hotel is nearly completed. I have all my money ready to go on the table. Someone must want to grab it and cap all their losses," he said.

The banks have lent between £55 million and £60 million to Simmonscourt Holdings and Harvard, and interest is mounting on the monies. "Someone must want the £60 million," the spokesman said.

The contract held by the investors is for the delivery of a completed hotel which is to be operated and run by the Four Seasons group. The spokesman said the group would be willing to be "flexible" in how it took over ownership of the hotel, in order to facilitate Mr Farrell.

The spokesman said the investors were not taking part in the project as a tax scheme. "We are the hoteliers in this. We are in it for the long term and taking the risk. If there are losses then we will pay them."

He said the Four Seasons group, which is headquartered in Canada and runs five-star hotels around the world, will manage the hotel under a board appointed by the owners.

The project was assembled by accountant Mr Derek Quinlan and lawyer Mr Peter Donnelly, of The Quinlan Partnership. The spokesman said the partnership has been involved, with other groups of investors, in the construction of hotels in Europe and the US. These were investments and not tax schemes, he said.