City councillors are adamant that it is a ‘safe risk’ to lend £15 million of Peterborough taxpayers’ money to a private company to build a luxury hotel on Fletton Quays.
The money will be loaned to Propiteer Hotels Ltd, a construction company formed in April 2018, to build the 160 bed Hilton Garden Inn on the South Bank development.
The loan was previously due to go to Norlin Hotels Holdings Limited before ownership of the hotel changed hands.
Propiteer and Norlin have previously collaborated as investment partners.
Cllrs Aasiyah Joseph and Nick Sandford called upon fellow councillors to take the rare step of calling-in the loan (asking for the decision to be reconsidered) on the grounds that it was not in the public interest to risk taxpayers’ money in this way.
At the meeting of Peterborough City Council’s Growth, Environment & Resources Scrutiny Committee, Cllr Aasiyah said: “The risk associated with this loan is far too high - how can it be in the public interest when we haven’t had time to get due diligence done?”
A loan can be called-in if the council believes that it has been made without considering all other alternatives, if it is not in the public interest to make such a loan or, if the loan is not within local government finance guidelines.
Cllr David Seaton, cabinet member for resources, said: “This decision has already been made at executive level. The only matter for members this evening is whether the loan should be called-in because of the change of ownership of the construction company.”
He continued: “We asked Deloitte to gather due diligence on Propiteer Hotels Ltd, a company specifically set up to build this hotel for Hilton, and both parties have complete confidence in them.”
Under the terms of the deal the council would borrow money at a “very competitive” interest rate before lending it to Propiteer 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.
Peter Carpenter, acting corporate director of resources, said: “We know the directors of the company; David Marshall comes from one of the 100 best construction companies in Essex; Colin Sandy was financial director of Tottenham Hotspur for Lord Sugar, and Tom Dalton was chairman of the second largest independent construction company in the world.”
Cllr Seaton added: “I would argue that our taxpayers’ money is actually safer with them. Yes, there is a risk, but we feel it is justified, and we could make £500,000 profit on our loan.”
Cllr Dave King was not convinced. He said: “If they’re such a huge company, why do they need a £15 million loan from us?” However, chairman Cllr Chris Harper refused to accept the question as it was not relevant to the calling-in of the loan.
Cllr Ed Murphy pointed out: “Surely, Mr chairman, it is precisely in the public interest for the taxpayers of this city to know who we are lending their money to, and why? It’s not our £15 million, it belongs to the people of Peterborough.”
Cllr Joseph, who had tabled the call-in of the loan, said: “I am not saying that I am against the building of this hotel, I’m just uneasy about lending such a vast amount of money to a company barely eight months old and who we know virtually nothing about.
“One of the directors of the new construction company even works for Deloitte – that surely must be a conflict of interest?”
Cllr Nick Sandford, who co-authored the call-in, added: “I think the financial competence of the council is relevant to the call-in of this loan. We don’t have a great deal of information on these people, and what we do know worries me.
“Yes, it is important that the council gets extra money from investments, but they should be done in a cautious way so that taxpayers’ money is invested prudently.”
Councillors voted by majority not to call-in the loan, which is now approved.