Council chiefs order secret review into hotel investment
PUBLISHED: 07:00 31 August 2009 | UPDATED: 11:47 06 July 2010
Council chiefs have ordered a secret review into the future of a controversial £7m investment in one of Norfolk's most prestigious hotel and spa complexes after its owners defaulted on their rent.
Council chiefs have ordered a secret review into the future of a controversial £7m investment in one of Norfolk's most prestigious hotel and spa complexes after its tenants defaulted on their rent.
Breckland Council bought the upmarket Barnham Broom Country and Golf club, which is in the neighbouring South Norfolk area, in a deal worth £7m in August 2006.
But the EDP has learned that on August 4, members of the ruling cabinet met behind closed doors to consider a confidential report which disclosed that the tenants defaulted on the rent last November and now owes around £500,000 to the council.
Council chiefs are furious that news of the secret review has leaked out - fearing that any adverse publicity could jeopardise its investment of public money into the project before it has had a chance to investigate and set right any potential issues.
Set in 250 acres of land the hotel complex offers two golf courses, tennis courts, a health club spa restaurant as well as wedding, conference and banqueting suites.
Built in the 1980s in the peaceful river Yare valley, the four-star hotel promises its customers 'luxury comfort at an affordable price'.
But details surrounding the deal have always been shrouded in secrecy - with even backbench councillors left in the dark about the plans, which were only referred to at the time as “Asset A”.
This year the council put on hold plans to bankroll a major upgrade of the venue which would add another 49 rooms because of the credit crunch.
And the latest report by then deputy chief executive Tim Leader concludes that there is no easy resolution to the club's financial issues and one option could be selling it off.
Failing that the council could find new tenants, or renegotiate the tenancy with the existing tenants. There is also a question mark over a decision by the council to hold back some of the cash invested in the property, thought to be around £1m, and whether it will incur a VAT liability.
Mr Leader, who has now left the authority to take up a new job in Doncaster, also states that at the time of the purchase the advice given to councillors was not sufficient to make an informed decision and that neither councillors nor the council were qualified to manage such complex investments and had no knowledge of such a specialised business sector.
Measures should be put in place to help learn from the lessons of the Barnham Broom deal, if the council again decides to dip into the property market.
Now the council has ordered a second secret report be written to examine the options in detail, which is due to report back to cabinet on September 15 and full council in October.
Despite repeated efforts to contact hotel bosses, the EDP was unable to speak to anyone about the latest developments.
And last night the council was staying tight-lipped about the report and its future involvement in the business, while the minutes of the meeting make no reference to the hotel, but simply state that the chief executive together with the chairmen of the overview and scrutiny committee and the audit committee “be tasked with exploring all options” requested by the chairman of cabinet and council leader William Nunn.
Mr Nunn, who has always insisted the purchase was an “excellent business opportunity” and would give the ratepayers a return at least 2pc higher than leaving the money in the bank, said there would be no change in the policy of using taxpayers' money to invest in commercial assets.
The thinking behind the strategy is to produce a profit which can be ploughed back into services or used to keep council-tax bills down, while also preventing any surplus cash being clawed back by the government.
“The concept of the authority still investing its capital in commercial assets is still the right thing for the organisation to do in the long term,” he said. “Selling anything is an option. Even when we first bought it, selling it was an option.”
Chief executive Trevor Holden said: “It's a confidential 'below the line' report which I am not at liberty to discuss at this stage. It's disappointing that a below the line report, which is financially damaging to a commercial business has found its way into the public domain prematurely.”