The billion-pound battle over Claridge’s hotel from Belfast to Qatar

Credit Suisse set to become latest entity dragged into dispute between former friends

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

The 220-year-old luxury Mayfair hotel, whose guests have ranged from Mick Jagger to Winston Churchill – and which was a favourite lunch spot of Queen Elizabeth II – fell foul of government guidelines that ordered venues to shut as part of efforts to halt the spread of the virus.

Like most hotel businesses, Claridge’s – and the Maybourne Hotel Group that owns it – claimed furlough cash to fund wages for its waiters, porters and managers as the pandemic choked off business.

All told, Maybourne entities, including its Connaught, Berkeley and the not-yet-opened Emory hotel, claimed up to £12m, according to records obtained by the Guardian.

Meanwhile, work continued on the £800m renovation of the quartet, including a luxury subterranean spa at Claridge’s, to enhance the value of the jewel in the crown of its royal proprietors.

Maybourne is part of the growing empire of prestige assets belonging to the phenomenally wealthy ruling elite of Qatar, the gas-rich emirate due to host the upcoming football 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 masterminded Qatar’s investment in the UK, including deals to buy Harrods and the financing of the Shard.

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

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

Claridge’s hotel London
Like most hotel businesses, Claridge’s claimed furlough money during the coronavirus pandemic. Photograph: Jon Arnold Images Ltd/Alamy

The Qatari aristocracy are embroiled in a multibillion-pound legal fight over the no-expense-spared overhaul of Claridge’s. Now that fight is about to escalate, with the embattled Swiss bank Credit Suisse set to become the latest entity dragged into a bitter dispute between former friends.

The tussle revolves around the true value of Maybourne’s portfolio of luxury hotels and the impact that this price tag has on an agreement between the Qataris and Paddy McKillen, a Belfast-born hotelier who has overseen the renovation.

The result of McKillen’s work has wowed critics. The penthouse suite, featuring a Steinway piano, is expected to carry a per-night price tag of £100,000 when it opens later this year.

Claridge’s did not have a spa before but McKillen’s builders have put one in, digging out a five-floor excavation below the famous black and white lobby, at times with their hands, to avoid any uncouth rumblings disturbing the guests who have returned post-pandemic.

In the Japan-inspired treatment rooms, guests are treated to floral kimonos instead of the usual robe and slippers. They can choose from a vast menu of treatments, or relax in a private cabana amid the stone pillars surrounding the swimming pool.

As peaceful as the result of the makeover may be, the war over the value created by it is likely to be long, expensive and bitter, with one insider noting: “Nobody is going to win except the lawyers.”

A second source close to the dispute said that the Qataris appeared to be ready to spend “tens of millions” on legal fees, arraying their almost unrivalled financial power against McKillen’s stomach for the fight.

That battle pits McKillen against his erstwhile friend and saviour, 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 the Irish real estate investor Derek Quinlan.

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

McKillen did not want to relinquish control without a fight but ultimately he had a choice: either rack up huge and risky levels of debt to buy out the Barclays or enlist a wealthy backer.

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

What happened next has become the crux of a prolonged and costly legal dispute.

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 business, Hume Street Management Consultants, a lucrative seven-year contract to spruce up the hotels to match the world-beating standards of luxury living that the Qataris expected.

McKillen would get 36% of the resulting increase in the hotels’ value above the £1.3bn price tag that had been set by the Qataris’ initial investment, with deductions for the costs the Gulf owners incurred paying 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 his longtime associate Liam Cunningham were unceremoniously jettisoned from the board of Maybourne Hotels, amid a dispute over his share of the hotels’ increased value.

It is thought that McKillen is claiming that the portfolio is worth upwards of £5bn, a near fourfold increase since 2015 that could see him pocket seven figures.

The Qataris beg to differ, to the point that it is unclear whether McKillen will receive anything at all. Another point of difference rests on whether hotels in Beverly Hills and the French riviera, which the Qataris argue were added to the portfolio after their deal with McKillen, should be included. Factoring them in would increase McKillen’s payout.

Both sides say that the contract between McKillen and the Qataris is unambiguous and favours their own interpretation of events. Given how far apart the two sides are in their valuations – by a factor of 500% according to one source – a settlement appears unlikely.

One way to arrive at a valuation is to ask an independent bank to estimate the price tag. To that end, HBJ and HBK are understood to have asked Credit Suisse to do the job.

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

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

While the legal process plays out, HBJ can take comfort in having full control over London’s most famous hotels, with the possible exception of the Ritz and the Savoy, which both 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. Photograph: Arnd Wiegmann/Reuters

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

They include his son Mohammed bin Hamad bin Jassim and his right-hand man, the Italian banker Michele Faissola, who was recently cleared on appeal, having been given a jail sentence as part of a probe into the falsification of accounts at the Italian bank Monte 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 centre for HBJ’s many business interests in Britain – and a stone’s throw from Claridge’s.

Many of the guests enjoying Claridge’s genteel and peaceful surroundings will be blissfully unaware that their bed for the night is the subject of such an unseemly and acrimonious brawl.

As for the 210-year-old hotel and its staff, they have surely seen it all.

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


Rob Davies

The GuardianTramp

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