Speedy negotiations swung Savoy deal for Quinlan

The €1.13 billion purchase of the Savoy hotel group in London by Quinlan Private was done in just three weeks. It was processed before the Dublin private client advisory group had even lined up a definite list of investors.

The banks who are going to provide finance in the deal have still not been agreed on. Negotiations involving a number who would like to become involved are ongoing.

It was in the first week of March that Quinlan Private heard from sources that the Savoy group was on the market. Late last year, it had considered buying Claridges, one of the hotels in the group, but had decided the price was too high.

The prospect of buying the luxury hotel group was more attractive to Quinlan Private than buying Claridges on its own. It set up a meeting with the then owners, the Blackstone group, and made a firm proposal.

In return for exclusivity, Quinlan Private would commit to completing due diligence and framework negotiations within three weeks. The bid offered was not the highest being made to Blackstone but the speed with which Quinlan Private was willing to operate was attractive. It showed commitment. Negotiations were ongoing at the time with one of the richest men in the world, Prince Alwaleed Bin Tala Alsaud.

Such a swift turnaround of such a huge deal was unusual. Quinlan Private had 80 people working on due diligence in the first week. It made use of a consultancy firm in Denver, Colorado. Given the speed with which events were moving, the investors who would actually buy the group had not yet been lined up.

"We know what our clients like and we know what their capacity is," said Quinlan Private partner Mr Peter Donnelly, when asked to explain how they could proceed in such circumstances. "We go and do the deal and if the clients don't take it, we can keep it."

They made sure there was "sufficient appetite" for the deal by way of a series of meetings with interested parties. The list of investors is now bedded down and Mr Donnelly will say nothing about their identity or number, other than that they are Irish.

Mr Donnelly spoke to The Irish Times on Wednesday by telephone from Prague, where he was completing a €30 million purchase of a prestigious retail building, the Euro Palace. Quinlan Private also owns the €60 million Charles Square Centre in Prague, which has 230,000 square feet of premier office space.

As well as the Savoy group, Quinlan Private also owns the Four Seasons hotels in Milan, Prague and Budapest. It has a hotel expert on its staff to whom the management staff of these hotels will report.

Quinlan Private tends to buy properties and businesses as long-term investments. "They've bought about 140 assets and sold two," a source said of Quinlan Private during the week. Mr Donnelly said a central element of the firm's thinking was to buy assets where the real estate value would "underpin the overall investment". Even if the hotel industry "disappeared overnight", he said, "you would not lose all your money".

The hotel business tends to be cyclical. A key factor is getting your timing right, he said. Some properties, however, he said, are so unique that they are rarely affected adversely by the ups and downs of the sector.

He believes the work done on the Savoy group by its former owners will yield benefits that have yet to be reaped. "That doesn't mean we'll sell when the benefits flow through."

The Savoy group purchase brought the number of hotels owned by Quinlan Private to 18. The business was established by accountant and former Revenue tax inspector Mr Derek Quinlan in 1989. He now has two partners, Mr Tom Dowd and Mr Donnelly. The business employs 33 people and has three arms: Quinlan Asset Management; the Quinlan Partnership; and Quinlan Private Client Services. Mr Donnelly pointed out that the business does not make use of offshore tax havens in its deals, as had been suggested during the week.

As well as hotels, the group owns office space, primarily in Dublin but also in London and Prague. It is looking to make such investments in Budapest and is also looking at a residential/golf project outside Atlanta, in the US, as well as two US office buildings.

Mr Donnelly said the exchange rate with the dollar made investing in the US attractive but there were difficulties with hedging exchange rates and taxation.

Most of the assets held by Quinlan Private are held for investor clients, though some are held for the partners. Mr Dowd is an accountant who used to work for Deloitte & Touche. Mr Donnelly is a lawyer who used to work for A&L Goodbody.

Mr Donnelly believes Irish investors are now spending so much money abroad because "the pricing of Irish property is such that there is not much value left". It is also because of all the money made during the boom.

He believes there were "always a lot of successful business people in Ireland" but that they used to go about their affairs more quietly than they do now.