A deal for Newcastle City Council to take over a four-star hotel has been completed, after its previous owner racked up a debt to the local authority of almost £40 million.
The Crowne Plaza hotel near Central Station was officially sold to the city council on Friday afternoon and its 135 staff transferred across. Its previous owner, Stephenson Hotel Limited, has been placed into its administration.
The company, a subsidiary of the Clouston Group, owed the city council £39.5 million after the authority gave it a series of loans over the years to support the building of the hotel and help keep it afloat. After it was deemed that the company would not realistically be able to repay the vast debt, the council has moved to take control of the award-winning hotel.
The council has purchased the hotel, through a combination of writing down of the debt owed and cash, for a price thought to be slightly above its market value – which was stated last year as being £13.6 million. While Stephenson Hotel Limited reported a net loss of £4 million in 2023, the Crowne Plaza itself is now thought to be generating an annual profit of around £1 million after recovering from the effects of Covid lockdowns.
It is expected that the council will seek to hold the ownership of the hotel for a fairly lengthy period, possibly 10 to 15 years, before then selling it on – in the hope that it can ultimately recoup the full £39.5 million it was owed. All existing bookings at the hotel will be honoured, its day-to-day running will still be outsourced to management company Aimbridge, and it will retain the Crowne Plaza brand.
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Mark Nicholson, the council’s chief finance officer, said: “The parties have worked together to try to reach a solvent solution for Stephenson Hotel Limited, the owner of the Crowne Plaza Newcastle - Stephenson Quarter, however, the level of debt involved was too high for this to be possible. Following independent advice, I am pleased that we have now managed to reach an agreement to acquire the hotel from Stephenson Hotel Limited.
“All existing staff will transfer to the wholly owned company set up by the council with the same terms and conditions of employment. There will be no disruption to hotel bookings and the hotel will continue to trade as normal. The hotel is performing well and has a bright future. While it is regrettable that a solvent solution was not achievable, I believe this is the best possible outcome for the hotel, its staff and the residents of the city.”
The owner of the hotel is now Crossco (1467) Limited, a company owned by Newcastle City Council and which has council director of investment and growth Michelle Percy as its sole director. Ms Percy was previously managing director of Stephenson Hotel Limited and a director of the Clouston Group before she joined the council in 2016.
The council originally issued a loan to help build the 251-bed hotel, which opened in 2015, as it hoped the development would act as a catalyst for the wider transformation of the Stephenson Quarter area. That was followed by another loan in 2019 and another £1 million the following year from an emergency pot set up to help “essential” city businesses during the Covid pandemic.
Those three loans, plus interest accrued, totalled a £39.5 million debt at the point at which administrators PwC were appointed on Friday. Clouston Group was the council’s original partner for the larger regeneration scheme, but was removed from the project in 2018 and a new joint venture was launched with PfP igloo.
Civic centre bosses will hope that the value of the hotel will grow if the long-promised revamp of the Stephenson Quarter, where it was recently announced that Atom Bank will move into the renovated Pattern Shop building, can be completed.
Stephenson Hotel Limited’s directors described the Crowne Plaza as “an outstanding trading success for the past six years, recording phenomenal 'best in class’ figures since the country came out of lockdown”. They added: “The hotel maintains strong operational performance, nevertheless, external market conditions have impacted the overall valuation of the hotel.
"Leading by example, our focus has always been on making sure that guests enjoy their stay and wish to return, that staff feel valued and think it's a great place to work, and that we trade as successfully as possible for the benefit of all stakeholders, including funders and the wider community. As we close the chapter on our ownership, we would like to thank our guests over the years for choosing us and our team members for their hard work and dedication. We sincerely hope that the hotel continues to prosper under its new stewardship.”
Alison Grant, joint administrator and director at PwC UK, said: “In terms of day-to-day trading, the hotel has always been a highly successful business and this effort is focused on resolving the debt position to ensure it can continue to thrive. We plan for there to be limited disruption as the hotel transitions to new ownership, with trading continuing as normal and no impact on employees and customer bookings.”
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