Concerns have been raised over the decision by Peterborough City Council to alter a £15 million loan for the new Hilton hotel at Fletton Quays.
Two city councillors have called-in the decision, citing fears that “due diligence has not been carried out”, although the authority insists its financial advisers have raised no areas of concern.
The council a year ago agreed the loan for Norlin Hotels Holdings Limited to accelerate the building of the 160 bed Hilton Garden Inn on the South Bank development.
Under the terms of the deal the council would borrow money at a “very competitive” interest rate before lending it to Norlin which would pay a higher rate of interest back to the council at the end of the two year period. This would make the council a profit.
The loan was to be secured against the land and the building and would never exceed the value of the site.
However, a new council report has revealed that the ownership of Fletton Quays Hotel Ltd has now switched hands to Propiteer Hotels Ltd.
And the alteration of the agreement will now see the loan paid out over 48 months from the time the council makes the first payment to Propiteer, instead of from September 2017 as previously agreed with Norlin.
Labour member for Park ward Cllr Aasiyah Joseph, and member for Paston and Walton Cllr Nick Sandford, who is group leader of the Liberal Democrats, have now called-in the decision to alter the loan.
They said: “We believe that the matter has not been allowed proper discussion at scrutiny. There is a concern that due diligence has not been carried out and that directors of the old and new companies may be the same.
“We want to review the case for the new loan and be assured due diligence has been completed.”
The councillors are being supported by Labour member for Central ward Cllr Amjad Iqbal, who is also shadow cabinet member for resources.
The council’s own report stated: “Propiteer Group and Norlin Group have previously collaborated as investment partners on a number of projects spanning several sectors.
“The decision was taken to separate their interests due to a difference in investment strategy: Propiteer Group wished to focus solely on property transactions and ownership, and thus retained the residential and commercial property portfolio, whilst Norlin Group retained the retail side of the business.”
It continued: “A Hilton Garden Inn will be delivered on the Fletton Quays site and the change of ownership will not affect this.”
The nine storey Hilton, which will include a restaurant, meeting rooms, a fitness centre and a rooftop bar with cathedral views, is due to be completed in 2020.
The call-in will be heard by the council’s Growth, Environment and Resources Scrutiny Committee on Wednesday, November 7 from 7pm.
Having heard the evidence the committee may:
. Refer the decision back to the decision maker, expressing its concerns and any recommendations
. Refer the matter elsewhere
. Take no further action, meaning the decision will be effective immediately.