How a Saudi prince lost a £250m palace

In 2016, when Saudi Prince Khaled bin Sultan al-Saud sought to acquire a private jet, his Swiss financial consultants compiled a list of assets to secure the funding, which included the "jewel" of his family's wealth - a 40-room mansion knows as the "London Palace".

The Holme, a 205-year-old mansion in Regent's Park, has been placed up for auction by a company managed by the London hedge fund Attestor for £250 million.

The sale, which will be the most expensive transaction in the history of London's home-buying and selling sector, has provided a rare glimpse into the often secretive crème de la crème of the British real estate market.

It also sheds light on one aspect of the Saudis' decades-long preference for the British capital, as well as the financial pressure placed on senior members of the Saudi royal family as a result of Crown Prince Mohammed bin Salman's efforts to reduce lavish state spending on princes and marginalize those who are not closer to him.

According to a source familiar with the finances of the Saudi royals, princes who have previously invested in London real estate now face tighter financial regulations at home and greater scrutiny in the United Kingdom.

A realtor  referred to the residence as a mini-Buckingham.

The Holme is one of the few mansions within the limits of Regent's Park and is situated on four acres of land. Prince Khaled paid $43 million to Guernsey-registered Quendon Limited in 1991 for a long-term lease on the whitewashed mansion.

A lawsuit filed by a second lender reveals a series of transactions and loans extending back decades that led to the sale.

According to court documents and persons with knowledge of the matter, big banks, law firms, and hedge funds catered to the prince's financial claims and aided his entry into the top tier of the London real estate market.

Prince Khaled's private jet was leased by Yuntian 10 Leasing Company, an Irish subsidiary of China Minsheng Bank, through a Bermuda corporation.

It asserts that the prince, who gave Quendon the money to purchase the home, has retained ownership of The Holme so that it might be utilized to collect aircraft lease arrears. The plaintiff asserts that Quendon was employed to "conceal" Prince Khaled's "continued beneficial ownership and control of the property."

The prince "has represented himself to third parties (…) as the owner of the property (…) while at the same time maintaining, at his convenience, that, as a result of the interference of the said offshore trust and corporate structure, he has absolutely no interest in the property" Yuntian's lawyers wrote, declining to comment.

Since Russia's invasion of Ukraine last year provoked sanctions against wealthy Russians' assets in the United Kingdom, offshore property ownership in London has come under close scrutiny.

Politicians, including the mayor of London, Sadiq Khan, have demanded stricter measures to shed light on property issues. The government of the United Kingdom has made moves to require foreign firms with UK property holdings to disclose their beneficial owners.

Five of Prince Khaled's children are listed as beneficial owners at Companies House by Quendon.

In court records, Quendon denies that Prince Khaled himself has an interest in the residence and that Yuntian may be targeting the property in order to recover the money he owes her for the jet.

He stated that law firm Linklaters drafted a memo in 1991 stating that the money sent by Prince Khaled to Quendon to purchase the house was a "donation" and advising him on how to take ownership of the house through a "legal" and "[tax] economical method" so that he and his family could continue to enjoy the continued use and benefit of the property.

Prince Khaled is a Sandhurst-trained general who served for three years as Saudi Arabia's deputy defense minister.

Quendon acknowledged that the prince, who is now 73 years old, has used The Holme as his London residence and that the corporation has borrowed against the home's worth to fund debts to the prince and members of his family.

Some of the loans were backed by the prince's personal promise. Beginning in 2016, guaranteed two loans totaling £68 million made by Standard Chartered to Quendon.

The money were used to settle a $13.9 million loan from Citibank, make investments including a $36 million portfolio managed by Standard Chartered, and lend Prince Khaled $15 million.

Both Standard Chartered and Citi declined to comment.

2017 represented a huge shift in the finances of Saudi Arabia's royals, as Prince Mohammed became the de facto ruler of the kingdom and initiated a corruption campaign against royal family members, businesses, government employees, etc.

Prince Khaled was not among the approximately 300 businessmen, former government officials, princes, and others detained in this context.

While the government claimed to have recovered $100 billion in ill-gotten gains, critics of its program suggested that it was partially a power move designed to marginalize a powerful elite that may represent a threat to the rising crown prince.

By fLEXI tEAM