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Categorized | Financial, Property

Qataris end talks to buy luxury hotels

Posted on September 25, 2016

The Grosvenor House, Le Meridien, Park Lane, London

The Qatar Investment Authority has abandoned talks to buy London’s Grosvenor House Hotel and two hotels in New York, increasing the likelihood that the trophy properties will be acquired by the UK’s richest men, the Reuben brothers.

The QIA’s withdrawal, confirmed by three people briefed on the situation, prolongs the troubles of India’s Sahara Group, which owns the Grosvenor House and majority stakes in New York’s Plaza and Dream Downtown hotels.

    Sahara has been seeking to sell the assets in order to extricate its founder, Subrata Roy, from jail, and had told Indian courts in July it was nearing a deal with the QIA. The Qataris have been eyeing the Grosvenor House for at least five years.

    Their departure from the process leaves only one active bid for the venues — that of a consortium of UK and Middle Eastern family offices led by the UK’s 3 Associates, which have submitted a $1.1bn bid for the Grosvenor House and Plaza.

    However, the British billionaires David and Simon Reuben own about $750m of debt that is cross-collateralised against the three properties.

    While the Reubens have not formally bid for the hotels, the debt — on which a Sahara group company has been in default since early 2015 — is eating into the assets’ equity value and the brothers are understood to be interested in acquiring them. They are the senior creditors, with the only other creditor being a linked Sahara company.

    Two people familiar with the QIA’s thinking said the debt situation was a factor in the sovereign wealth fund’s withdrawal. 

    Deloitte, which are administrators to the company that owns the Grosvenor House, have not opened a formal auction process but may do so later this year, in which case the Reubens are likely to bid.

    The Grosvenor House, a London landmark on Park Lane designed by Edwin Lutyens, has lacked investment in recent years because of the troubles of its owners: Roy was jailed in 2014 on contempt of court charges relating to a convertible bond issue.

    Simon Reuben (L) and David Reuben©Getty

    Simon Reuben (left) and David Reuben

    He was given a week to surrender on Friday after a period of release, and has struggled to raise the $1.6bn bail required to secure his freedom.

    Potential buyers of the hotel are eyeing refurbishments that could be carried out to reshape and update one of London’s best-known events and awards venues. 

    3 Associates, a UK family office, launched its bid for the hotels in July. Together with Saudi and Emirati private wealth funds, it is now seeking to buy the Grosvenor House and Plaza for $1.1bn, having revised an earlier bid that also included the Dream Downtown.

    Sahara labelled the offer “absurd” and said the price indicated was too low, but added: “Anybody who shall give us [the] right price is welcome.”

    The group also confirmed it was seeking a further loan from the Reubens against the assets.

    The sale process could be hastened if India’s Supreme Court, which is hearing the Sahara case, appoints the Securities and Exchange Board of India to bring about disposal of Sahara’s assets. The Reubens could also trigger legal processes of foreclosure in the UK and US.

    Other shareholders in the network of companies that own the hotels include Prince Alwaleed bin Talal al-Saud, the Saudi royal and business magnate, who owns a minority stake in the Plaza.

    The QIA, Deloitte, 3 Associates and the Reubens declined to comment.