Hilton hotel investment could result in 'loss or profit' Peterborough council says as it sets out uncertain road ahead

Peterborough City Council’s (PCC) investment in a new Hilton hotel for the city could result in “a loss or a profit”, the authority has said.

While its aim is to recoup its £15m loan to developers – now worth £17m, with interest – the council admits the road ahead is uncertain and it's not guaranteed to get its money back.

It currently intends to bid for the freehold of the unfinished hotel at Fletton Quays, meaning it would own the building and the land it’s built on, in order to oversee its completion.

While no new money would need to be invested into the bid itself, it would have to fund the “cost of the administration process, keeping the building safe and associated procurement costs to secure the necessary partners and advisors”, PCC says.

It may also have to pay towards construction costs to complete the hotel and has already earmarked £10m for this, although they’re likely to be higher.

A council spokesperson said that “there is the potential for the investment to make a loss or a profit, but the intention is for the council to complete the development and operate the hotel until such a time that the investment is recouped”.

“Our projected profit and loss forecasts show that the hotel should generate a profit. We are researching government grants to use at the moment.”

‘Expected value of hotel has reduced’

Meanwhile, the cost of completing the hotel is believed to have increased, while the “expected value of the completed hotel has reduced”, PCC says, and neither figure is entirely certain.

Council documents show that, before developers went into administration last year, it was believed it would cost £10m to complete the hotel: that figure has now risen to £14.4m, while the completed hotel is forecast to be worth £22m after three years of trading.

PCC says if it does successfully bid for the hotel, it would take on a "suitable development partner" to complete it and an operator to run it as part of the Hilton franchise.

It would then have the option of selling it, probably after three to five years.

Second Fletton Quays company taken into administration

But another factor which “may impact stakeholder involvement”, PCC says, is that Propiteer Fletton Quays Limited which owns the apartments adjoined to the hotel has also now been taken into administration on top of Fletton Quays Hotels (FQH) which was developing the Hilton itself.

This doesn't directly impact the council's investment but could have an indirect effect on the hotel project.

PCC's cabinet will be asked to authorise the council's credit bid for the hotel on Monday, 11th March, if it's clear, as expected, that none of the other companies involved in the £40m hotel project can provide a route to completion.

PCC invested in the new hotel in 2017 and extended its loan three times before taking FQH into administration in November last year.

Work on the hotel had stopped and it was believed the contractor and owner of the company had run out of funds, despite repayment of the council’s loan being due in December.

PCC says it’s committed to the completion of the hotel in order to protect its investment – both in the hotel and Sand Martin House, which is also in Fletton Quays – and so it has a say in the use of the building.

It also says it doesn’t want to leave the hotel empty for another winter as a lack of heating could mean it starts to deteriorate.