COVENTRY City Council is set to secretly buy out Coombe Abbey Hotel with millions of pounds of taxpayers’ money, the Observer can exclusively reveal.
It is understood the plan is to controversially behind-closed-doors invest up to £11million as part of ‘Project CAP’.
It comes after the council four years ago bought out the then struggling hotel’s £6.5million bank loan. The council took over as mortgage lender to the privately owned medieval-themed hotel, which could then borrow at much cheaper interest rates.
At the time, Labour council leaders assured council taxpayers the hotel’s post-credit-crunch problems, when profits halved, were temporary, and the loan would be repaid.
Project CAP is listed on Tuesday’s full council meeting agenda as a matter to be discussed in private business, which excludes the press and public.
While the expensive four-star 119-bedroom hotel is privately owned, the popular picturesque 500-acre park surrounding it is already run by the council, which is also the freehold owner of the hotel’s land.
The council previously owned the Grade 1 listed hotel, when it was considered a drain on resources, before a public-private partnership was set up in the 1990s.
A source told us: “At a time of austerity and local government funding cuts.. is this really a top priority for a local authority to start owning and operating hotels?
“What do councils know about running hotels?
“Where is the openness and transparency in spending our public money?
“What are the operating costs in running such a hotel and protecting a Grade I listed building?
“When services and jobs are being cut to the bone, they decide to buy a hotel.”
The matter will be discussed privately in the ruling Labour group’s cabinet meeting on Tuesday, with the intention of referring it to the later meeting of full council, which has a massive Labour majority.
Former MP and city councillor Dave Nellist, of the Trade Unionist and Socialist Coalition, said: “If this is true, this will take place on Tuesday in private when, at midday, parents and children affected by cuts in transport to schools for disabled youngsters will protest outside the Council House against that particular £500,000 cut, which will cause problems for dozens of families.
“I’ve been arguing for years that the council’s reserves and borrowing powers could be used to buy more time to stave off cuts – to schools transport, libraries, children’s centres and much more – and enable councils to campaign to government against funding cuts.
“Where would another £11million of cuts come from?”
Conservative opposition councillors in 2013 voted for the controlling Labour group’s proposal to buy out Coombe Abbey Hotel’s bank loan from Clydesdale Bank after demanding ongoing scrutiny of the deal, and evidence the loan would be repaid.
While the details were private in 2013, it was understood Clydesdale Bank had been about to call in the hotel’s loan of around £6.5mlllion amid concerns about repayment; and that loans had been taken out for a 39-bed extension prior to the 2008 financial crash.
The then Labour councillor Lynnette Kelly had told the council it was a quite different scenario to the local authority’s controversial £14million bank loan buyout in private of the Ricoh Arena company earlier in 2013, when the council argued it was protecting its investment in the stadium company as a shareholder.
She told the council at the time: “It is not a failing company. It’s performing well. However, the financial situation we have at the moment means the loan needs to be refinanced.”
The deal would protect rent payments and the council’s potential return on any sale, she had claimed.
Coombe Abbey Hotel, with wedding, conference and banqueting facilities, is run by Coombe Abbey Park Ltd for No Ordinary Hotels group. It is located just outside the city off Brinklow Road, Binley, Warwickshire..
Originally a 12th century abbey, it was surrendered under King Henry VIII’s dissolution of the monasteries in the 16th century.
Latest accounts for Coombe Abbey Park Ltd, filed in December last year, reported £9.8million turnover, up 9.8 per cent on the previous year; and operating profits of £990,000, up by a third.
The accounts outlined risks associated with fluctuating demand for rooms, competition from other hotels in the region and repayments on borrowing.
Approached for comment on our story by the Coventry Observer, councillor Jim O’Boyle, Labour cabinet member for jobs and regeneration, confirmed the until-now confidential plan, while refusing to confirm the commercially sensitive price for the purchase.
He told us: “The owner (Gordon Bear) wants to retire. He wanted us to buy it. It’s a going concern. It will raise revenue for the local authority.
“We should get a return of nearly 10 per cent per annum, which is as good an investment as we could find anywhere.
“It’s money that can be invested in services.
“It won’t be run by the council but we will oversee it in terms of a shareholders’ panel (as 100 per cent shareholder).
“It’s not without risk, but we believe it’s the best way to get revenue into the council for the local authority to spend on services.
“We think it’s a very good deal – better than we would get on the open market.
“It will also protect our heritage and culture.”
It is understood Mr Bear will stay on to help during a transition period.