Gulf fund buys hotels once owned by Irish investors

Abu Dhabi’s sovereign wealth fund has paid more than €760 million for a chain of hotels that cost Irish investors £92 million when their bank took control of the business in 2011.

The Abu Dhabi Investment Authority (ADIA), a fund operated by the oil-rich gulf state, has bought 42 Marriott-branded hotels in Britain from administrators appointed by Royal Bank of Scotland for $992 million (€761 million).

Irish investors led by the now defunct Quinlan Private and a company controlled by Israeli businessman Igal Ahouvi bought the hotels from Royal Bank of Scotland in 2007 for £1.1 billion.

The bank lent £850 million against the properties as part of that transaction. It had acquired them in 2006 from Whitbread and Marriott.

Lehmann Brothers

Lehmann Brothers subsequently bought part of the £850 million loan. A hedge fund subsequently acquired that share after the US bank collapsed in September 2008.

The Irish high-net-worth individuals saw their £92 million investment in the chain wiped out when the bank appointed Ernst & Young as administrators in June 2011.

At that stage the investment was overseen by Avestus Capital, which took over a large number of Quinlan Private properties.

Shortly before the bank moved, Avestus wrote to its clients explaining that RBS had refused to talk to the hedge fund which had acquired the Lehmann Brothers share of the debt.

Avestus predicted that both parties would shortly attempt to “move matters forward”. The bank appointed its administrators hours later.

Ernst & Young subsequently put the hotels on the market. Until recently an Indian hotel firm with backing from Qatari investors Blue Coast had been in exclusive talks to buy the portfolio.

Speculation

There was speculation that the Indian player was offering about £720 million (€830 million) for the chain. However, a deal was never done and the vendor moved on to the next preferred bidder, the ADIA.

Abu Dhabi is capital of the United Arab Emirates and contains about 7 per cent of the world’s proven oil reserves.

ADIA was set up specifically to invest some of the wealth generated by oil into other assets and in regions other than the gulf.

Typically it invests in property, shares and private equity.