Starwood Capital Group, the American private investment firm, is in advanced negotiations to acquire four apart-hotels in London from developer Graham Harris in a deal that will see the low-profile property investor repay company debts of £206 million (€260 million) to the National Asset Management Agency in full.
This will make him one of the biggest clients of Nama to exit the State property agency so far by repaying borrowings at par when the deal is completed in early January.
London-based property sources said Mr Harris's property group, called London & City Group Holdings, was selling three apart-hotels in central London, that had been financed by borrowings from Irish Nationwide (INBS), in order to exit Nama. Talks have been ongoing for months and are understood to be close to completion.
Substantial fines
Administrators to the London properties Duff & Phelps have alleged Mr Harris had misapplied substantial funds within the group. The administrators alleged he had “carried out a scheme unlawfully to return capital to London City and himself”.
In court documents Mr Harris denied he did anything illegal and counterclaimed that from June 2009 Irish Nationwide had placed his business in an “intolerable position” by refusing to continue lending to it in accordance with the terms of its agreed facility letters.
Mr Harris, in a court document, said that on June 15th, 2009, he wrote to the then head of Irish Nationwide’s UK arm Michael Fingleton jnr, son of the society’s former managing director Michael Fingleton, telling him that “the late payment of monies and the withholding of monies have engendered acute anxiety throughout my operation, through [INBS’s] failure to follow through on agreements made.”
Mr Harris said this had forced him to spend £1 million a week to complete the developments in order to make them “profitable investments” for both him and the building society. In his reply, Mr Fingleton jnr said: “I need to apologise for another inconvenience. I feel that what was once a perfectly functioning relationship has broken down due to matters at a regulatory rather than [INBS] level.”
In court documents, Mr Harris said London & City had operated “an informal treasury function whereby cash was pooled”, and he said this was used to complete construction on various projects, which was certified by Davis Langdon.
‘Good faith’
Mr Harris said that he had at all times “acted in good faith in a way which he believed was in the best interests of the claimants [Nama] including . . . by the operation of cash pooling arrangements for the London and City Group”. The British property investor was advised in his dispute and negotiations to repay Nama by lawyers Quinn Emanuel and debt restructuring and acquisition advisers Opportune, as well as forensic accountants and other experts.
The sale of Mr Harris’s assets with borrowings repaid to Nama means he will be one of the largest single debtors to exit at par from the State agency to date.
Following the completion of his aparthotel business sale, Mr Harris is understand to have a portfolio of property valued at between £300 million and £400 million in Britain and France. He is thought to own a dozen valuable villas in the south of France.
