SINGAPORE (Oct 24): The manager of Eagle Hospitality Trust (EHT) says Urban Commons, the sponsor of EHT, has confirmed that they are “not in default on The Queen Mary ground lease” and that the decommissioned ocean liner “remains safe and structurally sound”.
Now converted into a 347-room upscale hotel in California, The Queen Mary is one of the key assets in the 18-property portfolio of EHT.
On Oct 23, The Edge Singapore had reported the CEO of Urban Commons had received a letter from John Keisler, the economic development director of the City of Long Beach. The letter is said to have alleged that Urban Commons had failed to meet its obligations under a 2016 lease agreement to repair and upkeep The Queen Mary.
The letter from Keisler, dated Oct 1, warned that Urban Commons may be found in default if the company failed to respond within 30 days.
See: Eagle Hospitality Trust could get wings clipped as key asset The Queen Mary sinks into disrepair
In a bourse filing on Oct 24, the REIT manager says it immediately communicated with Urban Commons to seek clarifications of the letter when it became aware of the letter.
Urban Commons has informed the manager that it is preparing a response, which will be “imminently released to the City addressing items referenced in the letter”.
“[Urban Commons] has confirmed to the REIT Manager that they are not in default on The Queen Mary ground lease and that The Queen Mary remains safe and structurally sound,” EHT says in the SGX announcement in response to The Edge Singapore’s article.
The manager added that the response will include specific maintenance items that have already been completed, are underway and planned in the future for the long-term preservation of the ship.
Urban Commons said that it has worked alongside Long Beach on the project over the past three years.
This comes after city-hired inspector Edward Pribonic’s latest inspection of the former luxury cruise ship pointed to several years of abandonment evident in issues such as broken or missing handrails and splitting carpets patched with duct-tape.
However, the manager of EHT claims that before its initial public offering (IPO) exercise, some US$23.5 million ($32.0 million) of capital expenditure had been invested in The Queen Mary.
“[Urban Commons] is also committed to fund a Capital Improvement Fund (CIF) Reserve which is equal to 2% of the revenues in 2019 and 3% of revenues thereafter for repairs and maintenance, including ordinary maintenance and capital items,” says Taylor Woods, the CEO and co-founder of Urban Commons.
Woods is also non-executive deputy chairman of the manager of EHT.
The manager of EHT says the ship benefits from multiple capital reserves to support continued investment. It adds that it will continue to monitor the situation and keep unitholders updated.
Shane Fitzgerald, partner at John A. Martin and Associates, the marine engineering company which Urban Common had hired prior to the IPO says, “Overall and as a result of these structural upgrades, The Queen Mary remains in excellent structural condition.”
EHT had requested for a trading halt on Thursday morning, pending the release of the clarification.
Units in EHT closed flat at 64.5 US cents on Wednesday. The counter has sunk some 17.3% from its IPO price of 78 US cents on May 24.
