Investors looking for a tax shelter for rental income are being invited to fund the development of a new landmark £9.7 million hotel on the edge of the River Shannon in Limerick. The four-star hotel will have 91 bedrooms and be known as The Millennium Hotel. Development work is due to begin early next year and the hotel will open for business in March, 2000. It will be let to Sean Lyne, of the Ennis-based Lyne family, who own and operate several hotels throughout the country. Mr Lyne is to purchase the hotel outright after seven years. His company has arranged for Friendly Hotels, the UK hotel chain, to manage the Limerick hotel. The Millennium Hotel will be the final phase of Steamboat Quay, a £20 million development of 170 apartments and 30,000 sq ft of commercial space, which have been built over the past four years by Pat Whelan and Brian Cusack. The same developers are handling the hotel, which will include a large leisure centre. They are being advised by Pat Chesser of Chesser Auctioneers, Limerick.
All the 91 bedrooms will be located on the first 11 floors of the tower block. A further 27 suites on the five upper floors will be leased separately to the hotel. Mr Lyne is to pay a rent of £447,750 over a seven-year period after which he will buy the hotel for £7.4 million. A rent for the suites has not yet been determined and as there is no buy-back agreement for this element of the scheme, investors will be able to retain ownership of them in the long term. It is proposed that the partnership funding the hotel will acquire the development site by way of a 98-year building lease for £50,000 plus stamp duty and enter into an agreement for the construction of the hotel. Of the £9.7 million total cost, Anglo Irish Bank has agreed to provide funds to the partnership of £7.44 million. Interest will be paid on the loans for seven years only, with a "bullet" payment of principal at the end of that period.
Chartered accountants Farrell Grant Sparks are advising partners taking a £150,000 share in the project that they will be expected to advance £33,750 from personal resources. The partnership will separately borrow the remainder (£116,500) from Anglo Irish Bank on a non-recourse basis. Assuming a 44 per cent income tax rate throughout the seven tax years, such a partner will receive a cash benefit of capital allowances of £9,846 per annum for six years and £6,564 in the seventh year.
The Lyne family are the principal shareholders and operators of the Irish Court Hotel Group, which has hotels in Ennis, Tralee, Killarney and Waterford. Next year, they plan to open four hotels at Shannon, Sligo, Letterkenny and Liffey Valley in Dublin.
