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When it comes to "loan-to-own" strategies, the billionaire Reuben brothers don’t just talk about it, they do it.
Earlier this month an investment company of brothers David and Simon Reuben bought a major London hotel development after providing debt to the scheme. It marked the third time in recent years the brothers used debt to take ownership of a scheme or precipitate its sale at a profit to themselves.
Here is how they did it:
Admiralty Arch
At the end of June, Motcomb Estates, one of the brothers’ companies, bought the Admiralty Arch hotel scheme featuring direct views of Buckingham Palace from Rafael Serrano’s Prime Investment Capital for an undisclosed amount.
PIC bought a 250-year lease from the UK government on the famous arched property for £60M in 2015, with plans to turn it into a 96-room hotel operated by Waldorf Astoria. It previously housed government offices.
The Reubens provided an £85M bridge loan to the scheme in 2019 after original funder Banco Sabadell did not extend its debt on the development. In 2020, a new £110M loan was put in place, and a year later a £180M loan maturing in 2022 was provided by the Reubens.
At the time of that deal, it was reported the loan gave the brothers a significant minority equity stake in the project and they have since taken full control. The project was scheduled for completion this year, but it is now scheduled to finish next year.
The Curtain
The Reubens bought the freehold of the 120-room Curtain hotel in Shoreditch, east London, from U.S. hotelier Michael Achenbaum in 2018. Achenbaum was granted a long-leasehold to carry on operating the hotel, with the Reubens taking a share of the operating profits — essentially a ground-rent deal.
But the hotel closed during the pandemic and did not reopen, with Achenbaum exiting and the Reubens taking full control of the property. It reopened in late 2021 under the Mondrian brand.
The Grosvenor House Hotel and New York Plaza
The Reuben brothers didn’t end up owning the Grosvenor House Hotel in London and Plaza and Dream Downtown hotels in New York, but they did precipitate the sale of the properties and make a profit in the process.
The brothers bought an $850M loan on the properties in 2015 from Bank of China after the hotels’ owner, Indian investor Subrata Roy, was jailed in 2014 for failing to appear before India's securities and exchange board in connection with a legal dispute. The debt was refinanced and the three properties sold off, with the Grosvenor House now owned by Qatari hotel owner Katara.
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