Paul Allen's Hospital Trip Yet another of the billionaire's investments is a money-loser.
By Janet Guyon

(FORTUNE Magazine) – Paul Allen, the Microsoft co-founder and cable entrepreneur, may be worth $20 billion, but he just can't keep his investments healthy (consider troubled Charter Communications). The latest to suffer is the Hospital, an appropriately named media center, private club, and restaurant space in the heart of London's Covent Garden. After swallowing $100 million of Allen's money, the Hospital is in intensive care.

When Allen bought the derelict Victorian maternity hospital for $8 million in 1996, he and pal Dave Stewart of the Eurythmics wanted to build a creative space for new-media types to mingle with Mick Jagger, Deepak Chopra, and other Stewart buddies. This convergence of talent would put on gallery shows, record music, make films at the Hospital's studios, and enjoy famed Chicago chef Charlie Trotter's cuisine. As Stewart told Vogue in January, "When creative artists in different genres get together, they do things."

But it took three years to win permission from London planning officials, and the May opening was derailed last fall when Allen and his Vulcan Investment Management advisors got cold feet. Construction halted. Hiring froze. Dennis Hopper, the Hospital's first artist-in-residence, was told to stay home. Trotter was out too, although his kitchen had already been built and a $320,000 stove ordered. By February, Allen had laid off Drew Kaza, the former BBC executive who was CEO of the venture; the COO; the club people; and the restaurant advisors.

Allen, who declined to comment, sent a Vulcan VC, Chip Treverton, to fix the mess. "The scope of the project has changed," says Treverton, 30, who took FORTUNE on a tour of the site. "In the downturn of the last several years, Paul has begun reassessing his entire portfolio." All that's opening this year is the TV studio, due to be completed in July, and the art gallery. The Hospital folks were at a London trade show recently, hawking extra studio space to any production company they could find. Plans for the private club may go forward, but with lower fees and more talented members. "We'd take David Beckham, but probably not Posh," says spokeswoman Deborah Fitzgerald.

A May 7 internal document obtained by FORTUNE projects pretax losses through 2007, though they'll fall from $9.6 million this year to $5.9 million in 2007. Treverton calls that a "worst-case scenario." And Allen remains committed. "There is a social agenda here as much as anything else," says Treverton. "I don't think return on investment is relevant." Makes one wonder how much longer Allen will be worth $20 billion. --Janet Guyon