The British Empire, such as it is, can claim Derek Quinlan as a minor conquest.
Sitting in a private Mayfair club one afternoon, he is tall, bald with a rusty fringe, sunspotted from wanderings beneath the Arab sun, great-bellied in a tailored blazer sprouting a white pocket-square. The red silk walls are hung with portraits of British aristocrats in knee stockings and powdered wigs: Henry, Edward, Eugene, conquerors of this, that, and the undifferentiated other. Quinlan was once hailed as the Irish Midas, the embodiment of the first time in history when Ireland was finally rich. He tells me what he calls “My Story,” the tale of his time among “the richest people on the planet,” pausing after describing a particularly violent billionaire or exquisite bottle of wine to note that he feels he’s giving “good color.” The scar of a recent triple bypass runs just beneath his tailored shirt; his is a kind of afterlife. A former partner estimates that he was once worth at least $1 billion—he now owes hundreds of millions. With the help of British benefactors he continues to live in luxury, skiing in Saint-Moritz, drinking at Annabel’s, cruising London in a Range Rover worth more than $100,000.
“I don’t see myself living there again,” he says of Ireland.
He has never publicly discussed his ruin, his exile—or the day in 2004, a decade and a world ago, when he bought four of London’s finest hotels, the Savoy, the Berkeley, the Connaught, and the jewel of jewels, Claridge’s, entwined with aristocracy since 1860, when Queen Victoria visited France’s Empress Eugénie there. During the 30s and 40s, deposed European royals installed themselves at the hotel after fleeing upheavals on the Continent. This entanglement of Claridge’s—where suites go for upwards of $10,000 a night—with power and glamour only deepened through the postwar era: rock stars, billionaires, and harems all have stayed at the grand red-brick pile in Mayfair.
“The hotel seduces with its old-world charm: its rooms are imbued with the ghosts of British luminaries,” says Anglo-Irish heiress and muse Daphne Guinness. “The apartment my late father-in-law frequented was that in which Churchill lived when he lost his seat after the war. It is so much more than a place to stay.”
Discretion has always been a part of this charm, and the hotel values it so highly that it connected some of its suites with private passages—and yet the hotel has itself become the object of public combat.
Claridge’s (as well as the Savoy and the Berkeley) was owned for almost a century by the family of the Victorian theater impresario Richard D’Oyly Carte; then, in 1998, the group of hotels—along with the later-added Connaught—were sold for $867 million to two American private-equity funds, Blackstone and Colony Capital. In 2004—following the post-9/11 recession—they saw an opportunity to exit at a profit and took it, retaining Deutsche Bank to sell the prized hotels and marking the start of an Irish odyssey.
‘I wanted real adventures to happen to myself,” says a nameless narrator in a story from James Joyce’s Dubliners, a schoolboy with fantasies of the Wild West, “but real adventures, I reflected, do not happen to people who remain at home: they must be sought abroad.”
In this sense, and maybe only this sense, the story of the Irish and Claridge’s remains one of dreams come true, playing out in Doha, London, Monaco—everywhere, it seems, but Ireland. Quinlan discusses the financial collapse as if it were but a geo-economically unfortunate golf outing, but to recall his boyhood in 1950s Dublin, “my father and mum with virtually no money,” sends him reaching for a pale blue Hermès handkerchief, weeping shame of origins: his father was an Irish Army major; his mother saved from her five-pound weekly allowance so her son could watch Westerns at the cinema, and would bring him along to visit two women at a home for the blind whose wards enthralled him. “I wanted passionately to be an eye surgeon,” he says. “I wanted to actually discover why people were blind. I was just fascinated by blindness.”
Blindness, as it happened, would be the stuff of both his rise and fall. Quinlan was not a uniquely gifted investor or property developer but, says one former partner, he was “a fantastic salesman, nothing more, nothing less.” He began studying medicine in college, but after academic difficulty he transferred to commerce. He became an accountant, then a tax inspector, then a financial adviser. His real-estate career began in 1991 when he bought a single ice-cream kiosk for around $300,000. In 1994 he financed Ireland’s first Holiday Inn Expresses. By the end of 2002 he was a part owner of the Four Seasons in Budapest, Milan, Dublin, and Prague. Money, some will tell you, changed him. He left his modest house for an estate on Dublin’s Shrewsbury Road and began flying privately and bringing his own fine wines to restaurants. As his wealth and belly grew, some of Quinlan’s younger associates began calling him “Two Dinners.”
By 2004, worth by his own estimate “around 100 million pounds” and running his own private-equity firm, Quinlan Private, he was perfectly positioned to pounce when Blackstone and Colony Capital put their hotels on the market. Deutsche Bank, which remembered Quinlan from a 2003 deal where he raised $200 million almost overnight to buy a portfolio of their own real-estate assets, recommended him as a buyer whose cash would come fast and without issue. On March 11 of 2004, Derek Quinlan, former tax inspector, signed to purchase four of London’s greatest trophy assets for $1.37 billion, far more than the market thought they were worth, as was his style. Quinlan prospered through raw charm and optimism that kept Irish banks funding him as—to many eyes—he overpaid for properties, a strategy whose flaws would be revealed when the markets crashed, but which passed as genius as they rose. With the Claridge’s acquisition, he stunned bankers up and down Wall Street, shooting from obscurity onto the pages of The New York Times.
He put down a $35.8 million deposit, then raised the rest through a partnership whose name suggested a conscious co-opting of a symbol of English power: Coroin, from the Gaelic for “crown.” “The Irish in London had traditionally been looked down on as poor Paddies,” says Irish Times journalist Simon Carswell. “These Irish upstarts were showing their onetime colonial masters they had arrived.” Coroin’s partners were bound by three notable terms: (1) Quinlan himself had a “golden share,” meaning that Claridge’s couldn’t be sold without his approval. (2) Any investor wanting to sell his shares had to offer them to the other investors before looking outside of the group. And: (3) The shares of any partner declared bankrupt would automatically be offered to the others. Quinlan wanted a marquee investor whose name would draw others, and so entered Coroin’s only non-Irish partners, Manchester, England’s billionaire Green family, who—critically—bought their shares through a trust based on the Mediterranean island of Cyprus. The rest came from a newly rich Ireland, and after some initial shuffling the ownership was as follows: Dublin stockbroker Kyran McLaughlin held 5 percent; Riverdance creators Moya Doherty and John McColgan owned 10 percent; the Greens owned 22 percent; and Quinlan owned 32 percent, a stake matched only by the man who was fated to become his antagonist, real-estate mogul Patrick McKillen.
A product of Catholic Belfast during the Troubles, and a friend of Bono’s for years, McKillen had an upbringing that was patrician compared with Quinlan’s. His family owned a chain of muffler shops, DC Exhausts, which McKillen says was sold for around $17.7 million about 25 years ago. He never attended college, and, at age 16 in 1972, he was sent to work in Dublin by his father, just as Belfast descended into sectarian violence. “Belfast and Beirut,” recalls McKillen, “those two cities were getting destroyed day by day, so it was a wise thing for my old man to say you’d be better off headin’ to Dublin.” Over the next 30 years he built his own fortune, a real-estate empire stretching from London to Tokyo, whose true value is a closely guarded secret but is placed by a former partner in the hundreds of millions. “Belfast Catholics have a certain style about them,” says this old associate. “Paddy’d work every hour that God gave him.” He has a home in Los Angeles, and one afternoon he met me at the Chateau Marmont, trim in a gray sweatshirt, his hair snowy white, the emerald of a gold claddagh ring making neon of the California sun. He had invested in a Quinlan Private deal in the past but had never dealt with Derek Quinlan directly. He describes the effect of wealth on his estranged partner with disgust.
“Quinlan was only interested in red wine and parties,” he says. “Paddy’s view on me says more about Paddy than me,” replies Quinlan.
“I had my mind convinced to say no,” says McKillen of the night when Quinlan brought him the hotel deal, “and he started to talk. He said the Savoy Group of hotels is for sale. It was the greed or whatever in the human being. I am an asshole: I said, ‘I’m in.’ ”
Quinlan now had $197 million and with it borrowed $1.2 billion from a consortium of Irish banks, giving him more than enough to buy the hotels, the full meaning of which became clear only when he flew to London to complete the deal. He showered at Claridge’s, then looked outside his window to see that someone had flown the Irish flag from the building’s grand façade. Ireland was England’s first colony, dominated and brutalized for centuries. Now, at last, the Irish were in London, seizing treasures. He thought of his army-major father and wept.
“Here was a group of Irish people buying the bastion of the British establishment,” offers Quinlan’s lieutenant, Gerry Murphy, a doughy man of 60 who speaks with the earthy cadences of his native County Cork. “It was a spectacular, unbelievable dream.”
The investors had planned to sell the Berkeley, the Connaught, and the Savoy at a profit, then repay the $1.2 billion and own Claridge’s free and clear—almost like a gift. But Derek Quinlan wanted more.
Coroin would ultimately keep all but the Savoy, which needed extensive renovations. The obvious buyer was a billionaire who had come second to Quinlan in the bidding process: the Saudi prince Alwaleed bin Talal. With his $23.7 billion fortune, the Savoy’s repairs—they would ultimately cost $350 million—were no obstacle. A deal was struck that August, off Cannes, aboard Alwaleed’s 282-foot yacht. Quinlan and McKillen attended, bringing along McKillen’s old friend Bono, who—Quinlan delights in telling—hailed Alwaleed as “the Warren Buffett of the Middle East.” Which title seemed to bring the Saudi prince joy. He bought the Savoy for $430 million.
Claridge’s was so heavy with status symbolism as to warp social space. Petrocrats, plutocrats, oligarchs—shiny people of a falsely gilded age—they all wanted to meet the hotel’s new owner, and Quinlan was only too delighted to be met: Qatar’s then foreign minister, Sheikh Hamad, invited him to his fortified desert palace; Sergei Pugachev, known in those days as the Kremlin’s Banker, invited him to Moscow for a viewing of a presentation showing his holdings in shipyards and coal followed by dinner in a grand room lined with bodyguards and portraits of the Romanovs. “He said . . . ” recalls Quinlan, as though relating the words of the divine: “You can have whatever wine you want.”
Last he came to the strangest land of all.
Follow the portraits of aristocrats in Quinlan’s Mayfair club forward beyond empire’s end and you will arrive at Sir David and Sir Frederick Barclay, identical twins, owners of a $3.9 billion real-estate, media, and retail empire, among its prized holdings the Telegraph and the Ritz hotel in London. Now 79, they live in Monaco and in a 92-room nouveau-Gothic castle on an English Channel island, Brecqhou, where the brothers have been accused of playing at extreme medieval fantasy by trying to annex the neighboring island of Sark, hoping to turn it into their own personal fiefdom.
Claridge’s must have been irresistible to the twins, who had climbed their way up from London’s lower middle class after starting out as housepainters. The Barclays, suggests an insider, were too busy with other acquisitions in 2002 and 2003 to focus on the hotels. Still, they wanted to meet Claridge’s new owner and invited Quinlan to visit them on Brecqhou in November of 2005. We get the fables we deserve: the former Irish tax inspector, now deep in money’s lurid vision quest, was encountering a pair of self-dreamt knights. Today, the Barclays effectively pay for Quinlan’s car, his house, and his children’s educations. But where Quinlan was bankrolled by the Barclays, McKillen has become their sworn enemy and proudly tells how the beleaguered Sarkees invited him to visit as a comrade-in-arms. He describes the Barclays’ domain: “The island Brecqhou is very small and [the castle] is like a seven-tier Christmas cake. It looks like the weight is breaking the island. It’s the most sinister, bizarre thing. Nothing prepares you for it.”
And nothing prepared the Irish for what came next.
In the spring of 2007, at the credit boom’s peak, Derek Quinlan joined two other Claridge’s investors, the Riverdance creators Moya Doherty and John McColgan, to produce a Broadway musical, The Pirate Queen. It told the story of Grace O’Malley, the Pirate Queen, who bonds with Elizabeth, the English Queen, in a duet, “Woman to Woman,” in which a few verses of easy liberalism erase whole centuries of strife.
The show closed after only 85 performances, a major loss for Doherty and McColgan, who in early 2008 sold their shares in the hotels to the other investors. The Irish were waking from their dream.
That September Lehman Brothers failed, triggering the global financial crisis. By 2009, Ireland’s economy was in ruins, her financial and real-estate sectors in states of free fall. Paddy McKillen had started diversifying his investments away from Ireland in 2000—his empire would stand. Quinlan, the embodiment of the boom, became the embodiment of the bust.
In March of 2009 he missed an interest payment on his villa in Cap-Ferrat. By May 11 of that year the man who had risen from nothing to riches had plunged back through nothing to owe hundreds of millions. He and his family left Ireland for Geneva, reportedly for personal and tax reasons.
To stave off total collapse the Irish government created the National Asset Management Agency (nama), empowered to shore up the economy by seizing toxic loans. For the Coroin investors, nama’s most horrifying power was an “associated debtor” clause, which meant that if the agency seized the debts of any investor who owned more than 25 percent of the hotels it could also seize Coroin’s $1.2 billion mortgage and sell it on the open market, where, according to McKillen, the partners feared, a vulture investor could buy it with a plan to use its rights as creditor to seize the hotels, just like a bank foreclosing on a home.
By the end of 2009 nama was moving on Quinlan’s and McKillen’s debts—both had extensive borrowings. But whereas McKillen decided to fight nama, Quinlan fell quietly into the acronym’s clutches and at an October 20 board meeting notified the partners that the agency would likely make real the nightmare scenario by seizing the Coroin loan through its associated-debtor clause. So began a palace coup. A month later all the investors asked that Quinlan sell his shares to keep nama at bay. He refused. They then requested that he resign from the board to minimize the fallout of nama’s action. Again he refused. Finally they used his appetites against him: Coroin investors were allowed preferential rates at the hotels. Quinlan extended the privilege to family and friends while—it was later alleged in court—using the hotels as a London office, racking up a personal bill of $237,000. McKillen and the other investors hired a lawyer to collect the debt. Someone leaked the action to the press, publicly humiliating the man who had once conquered London’s greatest hotel and now couldn’t pay his own colossal bar tab. And as Coroin turned against its own founding partner, nama continued its plans to come for the mortgage. Soon the best escape available to them was to refinance the loan before nama could seize it. For this they needed cash, the rarest thing in the world at that time.
Quinlan, desperate for liquidity, had been trying to sell the hotels since that September, preferring to deal with developing-world billionaires who would be amenable to paying him a “deal fee”—his requests here ranged from $36 million to $72 million—on the side.
McKillen and the other investors began discussions with a pair of American private-equity funds, Westbrook and Northwood, who valued the hotels at $1.3 billion. Negotiations proceeded through June of 2010, but the investors couldn’t sell without Quinlan—who wouldn’t agree. He says he believed the hotels were worth more; McKillen says he was holding out for a side payment, which the Americans would never agree to. Whatever the mixture of motives, he used his golden share to veto the deal, then went out looking for a better one from the man who had hosted him in the desert years before, by then Qatar’s prime minister, Sheikh Hamad.
Negotiations began “hotting up” in Doha that June, according to Murphy, with Quinlan rejecting an offer of $1 billion, then continued that July at Hamad’s villa at Mougins, in the South of France, growing complicated with Quinlan’s asking for a deal fee of around $40 million—money that McKillen says Quinlan wanted paid to a bank account in Geneva, away from creditors. But the Qataris wouldn’t go above $1.2 billion, and the process broke down weeks later at Sardinia’s Cala di Volpe hotel, where Quinlan says that he encountered, purely by chance, another figure from his earlier wanderings: Sir David Barclay. “He said, ‘I know what you [and the sheikh] were talking about,’ ” recalls Quinlan. “I said, ‘Yes, I’m sure you do.’ ”
That August the Barclays began employing a strategy with Quinlan they had been using for three decades: manipulating a distressed insider at an acquisition target for access and information. Quinlan, still in residence at his villa in Cap-Ferrat, would drive to Monte Carlo to meet the Barclays for coffee and cigars at the Café de Paris. The brothers coddled the crippled titan, offering financial help should he ever need it. They must have known he would. That October, unable to pay his Swiss tax bill, Quinlan faxed Sir David Barclay, who wired him a $600,000 “loan”—it has never been repaid—asking a few weeks later only that he be notified if Quinlan was ever looking to sell his shares in the hotels. Quinlan agreed. The Barclays had, for a relative pittance, gained direct access to the holder of Claridge’s golden share, but didn’t own him quite yet.
In early January the Qataris raised their offer to $1.4 billion, a deal, it seemed, that could finally satisfy everyone. On January 9, 2011, McKillen and Gerry Murphy met the Qataris in Doha—with Quinlan sending Murphy in his place, following the deterioration of his relationship with Sheikh Hamad over months of negotiations. Things had, it seems, spoiled between them: the Qataris received the Irish separately, offering the new, rich $1.4 billion valuation to McKillen but telling Murphy that, given Derek Quinlan’s earlier conduct, they’d only value his shares at the old price of $1.2 billion, another blow to an already wounded ego. The Barclays couldn’t have hoped for more. Where others had failed in dealing with all the Coroin investors at once, they would now pick them off one by one.
The next week in Gstaad, David Barclay met Quinlan, offering a $1.4 billion valuation, an immediate close with immediate cash, a deal to beat the Qataris. And also an impossible one, because Paddy McKillen loathed the Barclays.
In the fall of 2010, Frederick Barclay and McKillen met at the Ritz hotel in London. Each would later insist that the other had called the sit-down. Barclay recalls making lighthearted conversation. McKillen’s recollection is of suffering personal and national condescension. Barclay says McKillen arrived in an untucked shirt. McKillen says he was wearing a jacket and lacked only a tie, a dress-code violation for which he received a lecture in etiquette from Barclay: “He said, ‘Sit down. You’re lucky you’re coming to meet me or you wouldn’t have got into this hotel,’ ” McKillen recalls. “When I sat down I was fuming. I was burning inside, and I just said, Do I walk out now? Is this the biggest insult?”
He stayed “out of courtesy” and in turn received a 30-minute lecture on how Ireland should have voted on the Lisbon Treaty to reform the European Union; McKillen left with a view of the Barclays that could be described as unfavorable.
“He pathologically fucking hated them,” says Gerry Murphy. “His view was they were absolutely awful people. He was never going to deal with them—over his dead body.”
“They’re gypsies,” says McKillen, “gypsies.”
With Coroin, they moved quickly. On January 15, through their lieutenant and Sir Frederick’s former son-in-law, a onetime Chase banker named Richard Faber, the Barclays presented Quinlan with an exclusivity agreement that would bind him to discuss Claridge’s only with them for a month. He signed it, giving them just long enough to outmaneuver everyone. They had, in fact, been working all sides of the Coroin partnership, including the Greens, who on January 18 sold the Barclays their 24.8 percent stake in Claridge’s—revealing the magic of the Cyprus trust. The shareholders’ agreement should have required the Greens to offer their shares to the existing investors first—and kept the Barclays from ever entering the picture. The Greens sold the Barclays the trust itself, meaning that the shares it contained never technically changed ownership. It was like a child saying he’s taken no cookies, only the jar. Except it worked: the transaction would stand in the U.K. courts.
Quinlan’s stake, however, was bound by the shareholders’ agreement. Any outright purchase would therefore require offering shares to McKillen, who could have bought them to become Claridge’s majority owner. The Barclays had another ingenious solution: during his years of binge consumption, Quinlan had pledged his share as collateral against millions in loans. They simply bought the debts from Quinlan’s banks, then used their new powers as his lender to force him to transfer his voting rights—but not technical ownership of his shares themselves—into their name. In the space of a busy month the 79-year-old brothers had gone from being locked out of the Claridge’s consortium to controlling 60 percent of its voting stock.
McKillen attended the next Coroin board meeting to find Quinlan accompanied by Richard Faber, who informed all present that the shareholders’ agreement had been circumvented and the Connaught, the Berkeley, and Claridge’s were under Barclay control. “It was a Judas moment,” he says. “Not many times in your life do you just feel your partner sitting beside you has just thrown you under the bus.”
The Barclay plan wasn’t over, though. After a few failed attempts at co-existence, McKillen’s destruction became its final object.
nama had claimed McKillen’s personal debts alongside Quinlan’s. Unlike Quinlan, McKillen fought the agency in the Irish courts. The Barclays eagerly followed the proceedings, hoping to buy McKillen’s debts should nama seize them. When the courts ruled in his favor the brothers used J. P. Morgan as a front to approach his lenders at Anglo Irish directly, again offering to buy the loans, planning, once they had them, to foreclose. They would force McKillen into a cash crisis—he had no other lenders—and from there into a bankruptcy that would in turn force the sale of his shares, giving them complete ownership of Claridge’s. But Anglo Irish stood by McKillen, who, now livid, went on the offensive, claiming in the British courts that the Barclays’ deals with Quinlan and the Greens had both violated the shareholders’ agreement—that the sales should be voided and all Barclay shares offered to him. Litigation ran through this February, ending in costly failures when the courts ruled against him; McKillen was ordered to pay the brothers $12 million in legal fees, leaving the ownership struggle in the stalemate where it remains today.
As we sit at the Chateau Marmont, the twins are coming for him again. After McKillen escaped nama his loans had stayed with Anglo Irish Bank. They should have been safe there except that Anglo Irish had been nationalized in 2009, so the debts only ended up in other indifferent governmental hands. Anglo Irish was reorganized into the Irish Bank Resolution Corporation, a liquidation vehicle charged with disposing of Anglo’s old boom-era loans.
But out by the ocean in Santa Monica was Colony Capital, a $34 billion hedge fund run by Tom Barrack, who began this whole saga a decade ago, when he and Blackstone sold Claridge’s. Mashing a hamburger with his fork, McKillen reveals his latest plan: Colony will lend him the roughly $1.1 billion he needs to repay his loans before the Barclays can buy them. That week it happens: he escapes ruin one more time and gets his P.R. into high gear—The New York Times and the Financial Times trumpet his new narrative. He has a white knight in his corner now: Barrack. McKillen says he’ll keep fighting. He predicts that Quinlan will go bankrupt and the hotels will be his. It’s only a matter of time.
“This has now become personal,” he says of the Barclays. “I’ve stood up to them. No one has ever stood up to them.”
It could even happen, but less dramatic scenarios seem more likely. Tom Barrack takes a more pragmatic view, avoiding language of domination.
“No one really ever ‘owns’ these jeweled assets. We are all merely stewards for a short period of time with the mandate to leave them in better condition than we found them.” He seems to suggest that a compromise will be struck: “At the end of the day this is just business, and the right business decision will bubble to the top of a foggy cauldron.”
Until then, everyone’s stuck in limbo.
“Paddy’s situation is the same as mine,” Quinlan gloats after our interviews, Hermès handkerchief dry now. “All his shares are pledged.”
He has a point. The Barclays own Derek Quinlan. Colony Capital owns Paddy McKillen. The days when Irish investors backed by Irish banks took over London’s prized assets are over. All the Celtic tigers are trapped in foreign cages. But a dead dream is a strange thing to get off on.
“For some reason most people that become successful always want to be buried outside Ireland,” Paddy McKillen muses in Los Angeles. “They all want to be buried in France or outside Ireland, you know? It’s a very strange thing: the Irish seem to eat their own.”
