Sandelson faces competition to buy back GuestInvest

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The founder of GuestInvest, the buy-to-let hotel investment group that has gone into administration, is in talks to buy back the business but faces competition from hotel groups and real-estate companies.

Johnny Sandelson said he had lined up a new finance house for the business that owns the celebrity-endorsed Blakes hotel and four other premises due to be converted into hotels.

About 250 investors face uncertainty about their stakes in GuestInvest. Some were asked to pay about £1m each for 990-year leases on individual rooms, for which they would get an income from its use as a hotel room, yielding an expected return of about 6 per cent.

Some 60 investors paid in full and about 190 put down deposits of 10 to 20 per cent. One of the creditors is HBOS, following Bank of Scotland Joint Ventures’s purchase of a stake in the business two years ago in exchange for a £200m debt and equity package.

As well as Blakes, the assets are in prime central London locations – three in the Paddington/Bayswater area and the other in the City of London.

Nick Edwards, one of the two Deloitte administrators handling the insolvency, said there was “good interest” in the assets from hotel groups and real estate developers.

Mr Sandelson denied the business model had come unstuck because of the credit crunch, saying inquiries were continuing, albeit at a slower rate than a year ago.

“I am working closely with Deloitte to see if we can buy it out from administration,” Mr Sandelson told the FT.

He said cash dried up about six to eight weeks ago, and that investors would be receiving a letter explaining why the company had gone into administration.

Mr Sandelson declined to elaborate on the reasons, though people close to the situation pointed the finger at HBOS’s problems, leading to a breakdown in the joint venture.

But the administrators played down the HBOS link, saying they believed GuestInvest was struggling to complete its hotel conversions and had fallen behind in scheduled re-openings.

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