Peterborough City Council is set to consider the next steps for the stalled Fletton Quays Hilton Hotel project at a Cabinet meeting on Thursday, 2 October. The recommendation before members is to instruct the administrators of the company behind the hotel, Teneo, to market and sell the site, ensuring any disposal achieves “best value” for the council.
The 168-room Hilton Hotel has been at the centre of the city’s regeneration plans for several years, forming part of the wider Fletton Quays development. The site, which includes the council’s headquarters at Sand Martin House, 229 apartments, a multi-storey car park, and the Government Hub, was originally funded in part by a £15 million loan from the council to Fletton Quays Hotel Ltd in 2017.
Project Delays and Administration
Construction of the hotel began in March 2020 but delays soon emerged. The developer’s main contractor, secured on a fixed-price contract, went into liquidation in June 2022, compounding disruption caused by the Covid-19 pandemic. Following a slowdown in construction in May 2023, work on-site eventually ceased. Unable to secure new investors, the developer went into administration on 17 October 2023, with the council appointed as primary creditor. The adjacent co-joining flats entered administration on 15 February 2024.
A soft market testing exercise was undertaken in 2024, which initially identified a preferred bidder. However, that party later withdrew from the process in early 2025. A second potential buyer emerged, but the council’s assessment of next steps was put on hold pending further investigations and feasibility studies.
Investigations and Feasibility Studies
The council commissioned extensive investigations into the viability of acquiring, completing, and operating the hotel itself. Willmott Dixon, appointed through the SCAPE procurement framework, conducted a feasibility study estimating the costs to complete the building and associated risks. The study concluded that completion of the hotel would involve significant additional borrowing, create a high level of financial risk, and require specialist expertise the council does not currently possess.
Picture by Terry Harris.
The SCAPE process identified immediate issues with the building, including water ingress in the south-east corner where the external lift shaft to the sky bar is located, and a significant pigeon infestation. Costs to address these issues, including pest clearance, asset protection, and surveys, are estimated at over £1.3 million. These works would also have a positive effect on insurance requirements for the building.
Further cost analysis by consultants 31Ten refreshed the council’s understanding of the financial implications, confirming that any acquisition would entail substantial debt servicing costs and operational expenditure. Each additional £1 million in costs would increase borrowing requirements, while the company established to run the asset would require further financing, adding both capital and revenue pressures.
Legal and Financial Considerations
The council’s legal advisors, Pinsent Masons, have provided extensive guidance on the title and legal position of the site. The council, acting as a secured creditor under the terms of the loan facility agreement, is entitled to direct the administrators in accordance with the Insolvency Act 1986. Legal advice confirms that any instruction must be consistent with the administrators’ statutory duties, which include rescuing the company, achieving the best outcome for creditors, or realising property to satisfy secured or preferential creditors.
From a financial perspective, the council has already written off £1.22 million in interest on the original loan, leaving the principal of £14.88 million outstanding. Administration-related costs to date, including joint administrator fees, holding costs, and council project management and legal costs, total approximately £1.8 million. The council must also account for potential credit losses in its Statement of Accounts for 2024/25, while recognising any contingent asset recovery through the administrators.
Options for Cabinet
The council report outlines three potential options:
- Allow Teneo to proceed with disposal as administrators, estimated to take six to nine months.
- The council acquires the hotel “as is” and disposes of it, with an estimated timeframe of nine to twelve months.
- The council acquires the hotel, completes development, and either sells or holds the asset, a process projected to take 18 to 24 months.
After careful consideration of financial, legal, and operational factors, officers have recommended that the administrators proceed with a marketing and sale process. This approach is expected to generate significant interest from third parties while avoiding the substantial financial and operational risks of the council taking on the project itself.
Council Perspective and Quotes
Councillor Mohammed Jamil, Cabinet Member for Finance and Corporate Governance, emphasised the importance of a measured approach: “The Hilton Hotel project is one of a number of complex issues that were the making of previous administrations which we have been working hard to seek to address. We know that this is a project that people feel passionately about because of the amount of money that was originally loaned by the council to this company, however, what is important now is that we look to the future.”
He added: “When interest from a potential buyer fell through at the start of the year, we asked for a thorough investigation to be carried out to determine next steps, evaluating all the options available. What became clear is that we would need to approve significant additional borrowing and accept a high level of risk if we opted to build and operate the hotel. It is also clear that the council does not have the skills and expertise in-house to manage the operation of such a specialised asset.”
Councillor Jamil highlighted that the site has continued to attract strong interest from potential buyers. “There is significant interest in the site, which is reflected in the extensive number of approaches that have and continue to be made directly to the council, so we hope Teneo move forward as quickly as possible. It remains our priority to achieve the best possible outcome for residents.”
Value for Money and Strategic Priorities
The council’s report stresses that acquiring and completing the hotel would expose the council to significant financial risk, diverting resources from other priorities. Cabinet is reminded that its duty under section 3 of the Local Government Act 1999 requires it to secure best value, balancing economy, efficiency, and effectiveness in its decision-making. By directing the administrators to sell the asset through an open process, the council aims to achieve market value and minimize risk exposure.
The decision is also framed within the council’s broader strategic priorities, including economic regeneration. Facilitating the sale of the Hilton Hotel is expected to contribute to Fletton Quays’ overall regeneration without burdening council finances or operational capacity.
Next Steps
If Cabinet approves the recommendation, Teneo will be instructed to market and sell the site with the goal of achieving the best possible financial outcome. The disposal process is expected to take between six and nine months. The council will continue to monitor progress, while ensuring all statutory and financial obligations are met.
The Hilton Hotel project has faced multiple challenges since its inception, including construction delays, contractor liquidation, the impact of Covid-19 and Brexit, and the eventual administration of the development company. The current plan represents a strategic decision by the council to mitigate risk, safeguard public funds, and secure a positive outcome for the city.
Conclusion
The Fletton Quays Hilton Hotel represents both a significant investment and a complex challenge for Peterborough City Council. While the original vision for the hotel has been disrupted by circumstances beyond its control, careful analysis of financial, operational, and legal factors has guided the council toward a path that prioritises risk management and value for money. With Cabinet expected to consider the recommendations on 2 October, attention now turns to Teneo and potential buyers, as the city seeks to finally resolve the future of this long-delayed project.
