Fight for Claridge's boiled down to a battle between two families

Fight over Claridge's From the outside, the battle for three of London's most storied hotels was a tortuous four-year saga fought through proxies and the law courts.

But behind the scenes, it boiled down to a simple stand-off between two families.

On one side: Sir David and Sir Frederick Barclay, the 80-year-old owners of the Ritz and the Daily Telegraph, and Sir David's son Aidan.

On the other: Sheikh Hamad bin Khalifa Al Thani, the former emir of Qatar, and his 36-year-old son, Jassim bin Hamad.

In the middle: Claridge's, the Berkeley and the Connaught.

The drama concluded last week when the Barclays finally threw in the towel, selling their 64 per cent interest in the hotels. After patiently pursuing the hotels for years, the Qataris had boxed in the brothers and left them with few options.

Irish property developer Patrick McKillen, who will now manage the hotels for the Qataris, said he would immediately embark upon extensive renovation projects that have been stalled since the financial crisis.

Claridge's, where Winston and Clementine Churchill lived after the war and where the Queen and the Duke of Edinburgh held the party for their ruby wedding anniversary, will get two extra floors and another 40 rooms.

The Berkeley could get another 27 rooms and suites, a new spa and pool, and more bar and restaurant space.

The ownership of the hotels was complicated by a shareholders' agreement, drawn up in 2004, that gave existing shareholders pre-emption rights over any shares that were sold.

This forced both the Barclays and the Qataris to move behind the scenes, amassing their stakes through proxies to avoid triggering the clause.

It also stopped the Barclays from selling out freely. In March, they were willing to accept a £1.56bn offer from the Abu Dhabi Investment Authority (ADIA) for the hotels.

But Mr McKillen, who held 36 per cent of the shares, and Colony Capital, which owned the debt underlying his equity, declined the offer.

The Barclays believe both parties were being influenced by the Qataris, who had previously worked with Colony to buy the Hollywood studio Miramax and Paris Saint-Germain, the football club.

"That showed where people stood," said a person close to the deal. "Tom Barrack [the head of Colony Capital] said [the offer from Abu Dhabi] was an unbelievable deal, but he did not accept it. Patrick McKillen refused it."

Realising the Qataris would not allow them to sell their shares elsewhere, and unwilling to pay for a huge capital expenditure programme on hotels they did not fully control, the Barclays "made the obvious decision" to sell, according to the person.

If they were upset, they were comforted by a rising property market. "You play the cycles. Timing is everything. You have to take your profits when you can get them," the person added. Richard Faber, a spokesman for the Barclay brothers, said the business "has been a very successful investment for us".

The saga over ownership began after the financial crisis, which left the Irish consortium that had bought the group in 2004 struggling to finance the £660m of debt on the hotels.

Qatar, the Malaysian sovereign wealth fund 1MDB and the Barclays were all interested in buying the hotels, but the Barclays moved the fastest. The brothers were keen to own Claridge's as a sister hotel to the Ritz.

"Their advantage was that they did no due diligence. They just said they would do it. The Qataris use Credit Suisse, who do a thorough 45-day due diligence and order reports from KPMG and Jones Lang LaSalle and so on," said the person.

At the beginning of 2011, the Qataris offered a deal: a tentative joint venture, known as Project Court, and signed by Sheikh Jassim and Aidan Barclay, which would see the Barclays run the hotels and the Qataris help with the financing.

But Mr McKillen refused to be edged out. The Barclays offered him a one-year management fee of £5m and 18 per cent of the equity, but he wanted several years. He expressed his dislike for the brothers to Vanity Fair. "They are gypsies," he said. "Gypsies."

The Barclays sat tight and hoped that over time Mr McKillen would run out of money. Instead, he brought a series of court cases against the Barclays accusing them of buying their interest unlawfully. He lost them all, running up a £50m legal bill.

Eventually Mr McKillen turned to the Qataris for financing in 2012, offering them a way back in. A deadlock ensued.

"No one wanted a conversation about how to run the hotels," said the person close to the negotiations. "The only thing they agreed on is that they disagreed over how to run the hotels."

Finally, the rising property market offered a way out, and a chance to end the litigation. The Qataris offered less than Abu Dhabi, but the Barclays accepted. "The Qataris are straightforward people, but they are not for sharing," he said.

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