Is NAMA going to finance the redevelopment of London’s 5-star Claridges hotel?

This morning sees the continuation of what is a landmark case in Dublin’s High Court where Paddy McKillen is seeking to prevent NAMA getting its claws on his loans from NAMA Participating Institutions (PIs – AIB, Anglo, BoI, EBS, INBS). It is a strange case in many ways with paradoxes

(1) Paddy says his loans aren’t impaired but that some have expired without being paid, and it is said that if the property were sold in the short term, NAMA would suffer 20% losses on the €2.1bn portfolio.

(2) The conception and birth of NAMA has taken well over a year – if Paddy didn’t want his loans to be transferred then why didn’t he re-finance? As recently as August 2010, Paddy seems to have been saying he is “inundated” with expressions of interest in refinancing his assets

(3) For someone worth a relatively modest GBP £66m in 2009 according to the Sunday Times Rich List, an awful lot of effort seems to have been expended in preventing his loans transferring to NAMA.

(4) Paddy says he is a property investor and not a developer

I don’t know what definition of “developer” Paddy has in mind but looking at the planning application to build an additional 40 bedrooms onto his Claridges Hotel (which presently has 203 rooms and suites) certainly looks like development to me. And whilst I haven’t seen estimates of the cost of the proposed development, increasing Claridges room capacity is not going to be cheap, not least because guests may not enjoy the 5-star hotel experience with such major building works ongoing. The application presently before Westminster Council is to restore a previous application and it is understood that the matter will be examined on 14^th October, 2010. So who is going to fund this development?

Anglo won’t be engaging in new lending under the proposed wind down scheme presently on its approval journey to the European Commission. Bank of Ireland is the other NAMA lender currently involved with the Maybourne group (the hotel group comprising three 5-star London hotels, Claridges, the Connaught and the Berkeley) and its lending appetite for commercial property development is not known but BoI certainly didn’t feature in a recent Savills survey (from propertyweek.com, free registration may be required) of the very few lending institutions providing property finance at present. Last weekend the Sunday Times reported that NAMA were willing to examine a €675m refinancing of the Maybourne group contingent on an acceptable business plan and usual commercial logic. And NAMA has a development pot of up to €5bn.

So without NAMA, how will Paddy fund the development? And NAMA is the agency that Paddy is fighting tooth-and-nail to defeat in its plans to take over his loans. Another paradox?

UPDATE: 28th October, 2010.  City of Westminister Planning Department has put back their decision to re-instate previously granted planning permission to the 18th November, 2010. Meanwhile Sky News appear to have an exclusive inside track on negotiations between Maybourne and Northwood Investors, headed by John Kukral. It is claimed that Northwood (who appears to be leading a group of investors) has been granted a window of weeks to negotiate a financing package for the group which might also see a GBP £400m refinancing by Deutsche Bank. Northwood had not previously been identified as being in the frame to refinance the group. Westbrook Partners who had previously been associated with the refinancing of the group appear to have dropped out.

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