Howard Wu and Taylor Woods, otherwise known as Urban Commons, who between them own more than 13% of Eagle Hospitality Trust have requisitioned an extraordinary general meeting for two resolutions to be tabled. Resolution 1 is to issue US$50 million new units in EHT at US$0.075 per unit. Resolution 2 is to retain the current REIT manager. On Nov 30, the Monetary Authority of Singapore directed DBS Trustee to remove the manager, and look for a new manager.
Urban Commons announced on Dec 17 it has filed an appeal to the Minister of Finance on Dec 10, against the directive by the MAS to remove EHT’s manager (which is 100% owned by Urban Commons).
The REIT trustee says it does not have information on Urban Commons’ grounds of appeal. The trustee adds that Urban Commons had the opportunity to participate in the RFP Process. “After giving proper and careful consideration to each comprehensive proposal received under the RFP Process, the REIT Trustee (based on the recommendation of its professional advisers) identified SCCPRE (part of the SC Group) to have put forth the most credible proposal,” the trustee said.
DBS Trustee acting on behalf of unitholders issued a circular with the resolutions to be voted on in an EGM at 2pm on Dec 30. Under SCCPRE’s proposal there are four interdependent resolutions that need to be voted on before SCCPRE can be appointed the new manager. SCCPRE’s plans to stabilise the REIT include negotiating a US$125 million facility with bankers to provide sufficient liquidity to reopen EHT’s properties and provide the trust with sufficient working capital for two years.
SEE:SC Group chairman has a plan for Eagle Hospitality Trust, but will investors let him in?
EHT listed in May last year with 17 hotels and Queen Mary Long Beach. Out of the 17 hotels 15 are shuttered either because Urban Commons defaulted on master lease rent, or defaulted on payments to hotel operators.
According to Bert Grisel, managing director of Moelis, the new manager has concrete plans to stabilise the REIT, and at some point in the future, probably in 2022 or 2023, resume distributions.
Choices for EHT’s unitholders are stark and none of the options are attractive. Between Urban Commons’ proposal and SCCPRE’s clearly, SCCPRE’s is friendlier as it has managed to obtain a financing facility, without diluting current unitholders, and it is taking US$4.5 million of fees in units in 2021 and 2022 to align its interests with unitholders.
During a dialogue session with SIAS on Dec 17, a unitholder asked, “Will SCCPRE pursue legal recourse or civil liabilities against DBS Trustee, the issue manager, the financial adviser, the ex-reit manager and sponsor for this sham IPO after their appointment? The sole issue manager and financial adviser was DBS Bank.
Loh Hwee Long, CEO of SCCPRE, gave a diplomatic answer. “We were not involved in the initial IPO so it would be very hard for us to comment meaningfully on the IPO process. Rest assured, on a forward basis our priorities will be focused on reopening the portfolio and get the properties operational, and work towards stabilisation and recover back the value for investors.”
