A Spanish hotel company has lost a near £72m claim against an investor in its failed redevelopment of the old Marconi building in central London.
Grupo Hotelero Urvasco (GHU) had sued Carey Value Added, a Spanish fund which invests in hotels, for failing to advance funding under a loan agreement relating to the development of a hotel and apartments on the prime site on the corner of Aldwych and the Strand. GHU claimed that this led to the project failing, and the site ultimately falling into the hands of a Spanish rival, which opened the hotel ‘ME’ there earlier this year.
However, Blair J dismissed the claim and upheld a counterclaim by Carey for repayment of money advanced under the agreement.
Including interest, Carey says that €65,410,700 was due as at 18 January 2013. However, the judge says Carey is required to give credit for a sum of around €21m it has received in proceedings against a third party in Spain, subject to any further appeals in those proceedings.
GHU, which bought the site for £48.5m in 2004, engaged Norman Foster’s firm of architects and planned to redevelop it with a 173-room luxury hotel and 92 residential apartments.
The judge said that Carey came on the scene in 2007, when GHU had difficulties increasing its bank finance and that, had the agreements run their course, at completion, Carey would have acquired the property under a share purchase agreement, subject to a leaseback to GHU, which would have had an option to repurchase after seven years.
However, GHU alleged that Carey stopped lending in June 2008, in breach of contract, starving the development of funding at a time of tight credit and causing its failure. Work on the development stopped in September 2008 and receivers were called in.
In June 2010, the hotel was sold to a competitor Spanish hotel group, Sol Melia, and building work recommenced. The hotel, named ME, finally opened in January 2013.
GHU claimed damages for loss of profits from the development, and the judge said that its damages claim was valued in closing at about £71.38m.
However, the judge backed Carey’s argument that it was not in breach, ruling that it was not obliged to continue to lend because GHU was in default within the terms of the loan agreement.
The judge said that the main issue was whether or not GHU was in default as at 6 June 2008, when Carey was due to advance a tranche of the loan, but refused to do so.
Ruling in favour of Carey, he said: “My overall finding is that GHU was in default under the Loan Agreement as at 6 June 2008, and that Carey was not obliged to make the advance otherwise due on that date, and that its subsequent cancellation of the agreement was lawful. I find therefore that Carey is entitled to succeed on its counterclaim for the sums it has advanced to GHU, and on its claim against GU as guarantor.”
He also found that GHU would not have been able to fund the project to completion even if Carey had continued to provide funding under the agreement and that for the first seven years of operation the hotel would have been loss making. In the light of that, he said that any claim for future loss of profits “becomes tenuous”.
Grupo Hotelero Urvasco S.A. v Carey Value Added S.L. and anr Commercial (Blair J) 26 April 2013
Duncan McCall QC and Mr Tom Smith (instructed by Hogan Lovells LLP) for the Claimant in Folio 931 and the Defendant in Folio 1692. (GHU)
Lord Grabiner QC, Mr Manus McMullan QC, Mr Andrew De Mestre and Mr Douglas Paine (instructed by Mayer Brown LLP) for the Defendants in Folio 931 and the Claimant in Folio 1692. (Carey)
A Spanish hotel company has lost a near £72m claim against an investor in its failed redevelopment of the old Marconi building in central London. Grupo Hotelero Urvasco (GHU) had sued Carey Value Added, a Spanish fund which invests in hotels, for failing to advance funding under a loan agreement relating to the development of a hotel and apartments on the prime site on the corner of Aldwych and the Strand. GHU claimed that this led to the project failing, and the site ultimately falling into the hands of a Spanish rival, which opened the hotel ‘ME’ there earlier this year. However, Blair J dismissed the claim and upheld a counterclaim by Carey for repayment of money advanced under the agreement. Including interest, Carey says that €65,410,700 was due as at 18 January 2013. However, the judge says Carey is required to give credit for a sum of around €21m it has received in proceedings against a third party in Spain, subject to any further appeals in those proceedings. GHU, which bought the site for £48.5m in 2004, engaged Norman Foster’s firm of architects and planned to redevelop it with a 173-room luxury hotel and 92 residential apartments. The judge said that Carey came on the scene in 2007, when GHU had difficulties increasing its bank finance and that, had the agreements run their course, at completion, Carey would have acquired the property under a share purchase agreement, subject to a leaseback to GHU, which would have had an option to repurchase after seven years. However, GHU alleged that Carey stopped lending in June 2008, in breach of contract, starving the development of funding at a time of tight credit and causing its failure. Work on the development stopped in September 2008 and receivers were called in. In June 2010, the hotel was sold to a competitor Spanish hotel group, Sol Melia, and building work recommenced. The hotel, named ME, finally opened in January 2013. GHU claimed damages for loss of profits from the development, and the judge said that its damages claim was valued in closing at about £71.38m. However, the judge backed Carey’s argument that it was not in breach, ruling that it was not obliged to continue to lend because GHU was in default within the terms of the loan agreement. The judge said that the main issue was whether or not GHU was in default as at 6 June 2008, when Carey was due to advance a tranche of the loan, but refused to do so. Ruling in favour of Carey, he said: “My overall finding is that GHU was in default under the Loan Agreement as at 6 June 2008, and that Carey was not obliged to make the advance otherwise due on that date, and that its subsequent cancellation of the agreement was lawful. I find therefore that Carey is entitled to succeed on its counterclaim for the sums it has advanced to GHU, and on its claim against GU as guarantor.” He also found that GHU would not have been able to fund the project to completion even if Carey had continued to provide funding under the agreement and that for the first seven years of operation the hotel would have been loss making. In the light of that, he said that any claim for future loss of profits “becomes tenuous”. Grupo Hotelero Urvasco S.A. v Carey Value Added S.L. and anr Commercial (Blair J) 26 April 2013Duncan McCall QC and Mr Tom Smith (instructed by Hogan Lovells LLP) for the Claimant in Folio 931 and the Defendant in Folio 1692. (GHU)Lord Grabiner QC, Mr Manus McMullan QC, Mr Andrew De Mestre and Mr Douglas Paine (instructed by Mayer Brown LLP) for the Defendants in Folio 931 and the Claimant in Folio 1692. (Carey)
