SINGAPORE (June 22): The manager of Eagle Hospitality Trust (EHT) announced Sunday evening (June 21) that it has received additional notices of default by certain master lessees under the hotel management agreements.
This comes as a result of their failure to provide and maintain sufficient working capital for the hotel’s operations.
Default of payment
In an SGX filing, EHT said the amounts for the additional default notice for the Crowne Plaza Dallas Near Galleria-Addison, and the default notice for the Hilton Atlanta Northeast, came up to some US$338,000 (S$472,274) and US$1.1 million (S$1.5 million), respectively.
The master lessees of the Renaissance Denver Stapleton, the Holiday Inn Denver East – Stapleton, and the Sheraton Denver Tech Center, who owe some US$3.9 million, have received further notices of default from the relevant hotel managers for their failure to pay up.
Following the further non-disturbance agreements on May 15, the hotel manager of the Holiday Inn Denver East – Stapleton, and the Sheraton Denver Tech Center has demanded for the repayment of US$850,000, and US$700,000 respectively by June 5.
According to EHT, no payments have been made as of June 21.
Temporary caretaker arrangements
Each of the corresponding master lessors have implemented temporary caretaker services at 11 of EHT’s hotels, including Sheraton Pasadena, Holiday Inn Hotel & Suites Anaheim, and The Queen Mary Long Beach, in exchange for payment of monthly caretaker costs.
Under the hotel management agreements (HMA), the hotel managers of the same properties would reduce certain management services and obligations.
The hotels would also be closed to the public for the foreseeable future owing to the Covid-19 pandemic, as well as the lack of working capital required to keep and maintain the respective property.
Proceedings against Pasadena
The City of Pasadena have initiated legal proceedings against the master lessee and the hotel manager of the Sheraton Pasadena, as well as Urban Commons Cordova.
The complaint was filed in February due to unpaid transient occupancy taxes and tourism business improvement district assessments for May 2019 to February.
The hotel manager of the Sheraton Pasadena has filed a cross-complaint, alleging a unity of interest against the master lessee and the master lessor of the hotel on June 10. The complaint also requested that the hotel manager be fully indemnified from and against any settlement entered.
According to the filing, the complaint by the City of Pasadena estimates the sum of the City’s claims to be at US US$690,806.26 of transient occupancy taxes, tourism business improvement district, interest and applicable penalties that were payable for the months of July, August and September 2019.
The estimated financial impact to EHT will be an estimated US$1.3 million as at June 12.
Possessing property in some of the trust’s hotels
Liens, or the right to possess another person’s property until his or her debt is settled, were filed against over 10 hotels in the trust’s portfolio. The hotels included the Queen Mary Long Beach and Holiday Inn Resorts Orlando Suites – Waterpark.
The liens were filed following EHT’s IPO in May 2019, in relation to the non-payment of costs and expenses of work performed on EHT’s hotels that commenced or was contracted for, before the IPO.
The total outstanding amount claimed under the various liens came up to some US$8.26 million. The managers say they have not made a provision for such claims in EHT’s financial statements.
Notice of default for The Queen Mary Long Beach from the City of Long Beach
Lastly, Urban Commons Queensway, a subsidiary of EHREIT and the lessee of The Queen Mary Long Beach received notices of default from the City of Long Beach on the defaults under the lease agreement with the City.
According to the managers, Urban Commons Queensway breached several clauses under the QM Lease Agreement. These include failing to pay the monthly transient occupancy taxes to the City of Long Beach, failing to provide access to financial and maintenance records to the City’s auditor, and failing to pay the monthly rent to the City for the month of June.
EHT’s managers said they have been informed by its sponsor, Urban Commons, that Urban Commons Queensway has paid the partial amount of the defaults, and it is taking actions to “remedy” another default.
As such, the total amount of liabilities incurred by the master lessees in respect of its properties, stood at US$50.7 million, instead of the US$44.6 million that was previously disclosed in May 15.
EHT said its managers are in the process of consulting with EHT’s Chief Restructuring Officers, Moelis, and their legal advisers to ascertain the potential financial impact and implications arising from the proceedings and claims.
Units in EHT last changed hands at 13.7 US cents prior to a voluntary trading suspension that took effect on Mar 24.
See also:
- Eagle Hospitality Trust could get wings clipped as key asset The Queen Mary sinks into disrepair
- Scrutiny on Queen Mary warrants closer look at EHT’s portfolio
- Eagle Hospitality Trust misses IPO forecast by 24.4% with 4Q DPS of 1.179 US cents
- Eagle Hospitality Trust sinks 36% as managers mull asset sales, strategic review
- Eagle Hospitality Trust suspends trading, defers payment of latest distribution to unitholders
- Regulators scrutinise sponsor’s failure to comply with EHT’s master lease agreements, and role of trustee and manager
- Eagle Hospitality Trust's Wu and Woods to quit following discovery of 'prejudicial' transactions
- Eagle Hospitality Trust is a lost cause, unitholders’ hopes hinge on full investigation
- Queen Mary halts operations; Urban Commons remains committed to lease
- SGX RegCo pressing Eagle Hospitality Trust for restructuring updates
- Eagle Hospitality Trust to sacrifice distributions for the 'preservation and protection' of portfolio
- Eagle Hospitality Trust to 'cooperate fully' with MAS, CAD investigations; MAS reviewing proposed change of manager
