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Belfast tycoon McKillen 'triumphs' as Barclay brothers exit London's luxury hotels

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By Peter Flanagan

Published 24/04/2015

The Royal Suite at Claridges Hotel
The Royal Suite at Claridges Hotel
Paddy McKillen
Sir David Barclay (left) and his twin brother Sir Frederick Barclay

Belfast property developer Patrick McKillen's battle for three of the most exclusive hotels in London appears to have ended in victory, after his rivals - the billionaire Barclay brothers and financier Derek Quinlan - sold their interest in them.

The Barclays have offloaded their stake in the company behind Claridge's, The Berkeley and The Connaught hotels to Qatar's Constellation Hotels Group.

The move brings to a close the Barclay's interest in the hotels and ends what had been one of the bitterest disputes in business over the last four years.

In a statement, a spokesman for David and Frederick Barclay confirmed they and Mr Quinlan had ended their interest in Maybourne Hotel Group, which owns the hotels.

"We are pleased to have concluded this transaction and that Maybourne Hotel Group is now majority controlled by Constellation Hotels Group," he said.

"We have also reached an agreement to ensure an end to any litigation related to Maybourne Hotel Group so that there is a clear focus on investing in the continued success of these iconic hotels."

A spokesman for Mr McKillen confirmed the sale, but the terms of the deal were not revealed.

Last month, the Abu Dhabi Investment Authority reportedly bid £1.4bn for the hotels. At that price, the Barclays' and McKillen's interest would be worth around £1bn.

Both sides are likely to claim victory. Mr McKillen is known to have a good relationship with the Qataris and can move forward with renovations at the hotels, while the Barclays and Quinlan have made a huge profit on their investment.

The battle for the hotels has become almost a parable of the optimism of Ireland's Celtic Tiger and the recriminations of the bust. It has captivated the business world and dragged in figures from various fields, including politics.

In 2004, Derek Quinlan and investors including Mr McKillen forked out £750m for the three hotels, as well as The Savoy Hotel in central London.

The deal had been financed by Anglo Irish Bank.

The news stunned the market and catapulted the two men to the top table of the London property sector for having outbid the likes of a Saudi prince.

The hotels were controlled by a new company - Coroin Ltd - which owned the Maybourne Hotel Group. Mr Quinlan owned close to a third of the business, as did Mr McKillen. The remainder was split among a number of investors, including the family of UK businessman Phillip Green, which were held by trust.

Coroin quickly sold the Savoy Hotel, but by 2009, Quinlan was in trouble as the financial crisis enveloped Ireland.

It was then that the Barclays came into the picture. They are reported to have advanced him a loan, and in return Quinlan promised to notify them if he intended to sell his shares in the hotels.

In January 2011, the Barclays bought the Green family trust. At about the same time, Mr Quinlan signed over control of his Coroin stake to the Barclays, but not actual ownership of them - a crucial distinction.

Later that year, Nama, which had taken over the hotel group's loans from Anglo, sold those loans to the Barclay brothers.

Mr McKillen went to court repeatedly to prove that Quinlan could not hand control of his stake to the Barclays.

When the UK courts eventually ruled against him in 2012, it looked like the final straw in the ongoing dispute.

Mr McKillen and his businesses owed Anglo - now renamed IBRC - hundreds of millions of euro, and it seemed only a matter of time before the Barclays would buy him out of the hotels.

Mr McKillen needed a white knight, and US hedge fund Colony Capital fitted the bill.

Colony, along with another company, had sold the hotels to Coroin in 2004. But then they cleared McKillen's debts with the IBRC and helped him keep his stake in the hotels.

The dispute was then in a stalemate but yesterday's deal would appear to be the end of this chapter in the Celtic Tiger and its subsequent fallout.

Profile

Belfast-born Paddy McKillen left school in his teens to work in the family business, DC Exhausts, before making it in the property game. His first break came in 1992 with the purchase of the Jervis Hospital in Dublin for £4.4m, which he developed into a shopping centre. By 2008, it was valued at £313m. His property empire includes hotels, retail centres and office blocks in the UK, Ireland, France and more.

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