SGX-Listed Eagle Hospitality Trust Reveals Fresh Defaults, Liens

Cash-strapped and handcuffed by the pandemic, Eagle Hospitality Trust announced its latest series of defaults and litigation in a filing to the Singapore Exchange on Sunday.

EHT, comprised of Eagle Hospitality REIT and Eagle Hospitality Business Trust, said that the California cities of Pasadena and Long Beach had each taken separate legal actions against the companies holding properties in its trust portfolio, while a number of creditors had placed liens against the REIT’s assets.

In addition to these legal actions, the troubled hospitality trust was scrambling to maintain a set of shuttered properties as its hotel management partners reduced their services due to non-payment of fees.

EHT Suffers California Nightmares

EHT’s Sheraton Pasadena and nine other hotels in the trust’s 18-property portfolio face a variety of tax liens from local authorities as well as from third-party service providers who had not been paid for services to the hotels, the trust’s manager revealed.

Seven of the hotels face mechanics liens for work done after EHT’s IPO last May. Together, the liens are claiming $8.26 million before interest, costs and legal fees, the announcement said.

The statement to the exchange also revealed that the City of Pasadena, California filed a lawsuit in February against the Sheraton Pasadena and a property manager unaffiliated with EHT, seeking to collect overdue tax payments as well as tourism-related dues. In the complaint filed in February, the southern California community is seeking to recoup unpaid bills dating back to May 2019, the same month that EHT debuted on the Singapore exchange.

A unit of EHT which leases The Queen Mary Long Beach hotel also received a notice of default from the City of Long Beach. EHT managers said they have been informed by the trust’s sponsor that the Queen Mary master lessee has resolved a pair of partial defaults involving its operation, and that the hotel is taking action to reach an agreement on another default.

In addition to the Pasadena and Long Beach hotels, the properties affected by the suits and liens include IHG managed hotels in Anaheim, San Mateo, Denver, Orlando and Dallas, as well as Marriott managed hostelries in Sacramento and Denver. Hilton properties in Anaheim and Atlanta were also included.

Hotel Managers Reduce Services

In addition to the flurry of legal action, 11 of EHT’s 18 hotel managers are temporarily stepping back from servicing the hotels after EHT failed to repay promised funds and service dues.

The list of master lessors involved include Holiday Inn, Sheraton, Embassy Suites, Crowne Plaza and Westin hotels, among others, in five major US cities. EHT said in Sunday’s filing that total liabilities incurred by its master lessees have reached $50.7 million — up from the $44.6 million announced in a 15 May filing to the exchange.

Each of the 11 hotels’ managers are seeking hotel caretakers for the affected properties through which EHT will pay for a temporary service to maintain their buildings, the filing said. Each of the hotels are operating with a reduced number of staffers as the pandemic has slashed revenue and forced would-be occupants to stay home, and all but three of the hotels remain closed. The announcement did not indicate when the temporary contracts with the hotel caretakers would end.

Hotel Trust Continues to Struggle

Sunday’s filing by EHT is the latest a growing list of defaults and widespread turmoil for for Singapore listed trust, with the REIT, which listed on the SGX on 25 May last year, having already suffering financial stress even before the pandemic began ravaging the hotel industry.

On 25 March, Eagle Hospitality Trust informed its investors that it had shelved a distribution payment due to security holders after defaulting on a $341 million loan facility. Bank of America had issued a notice of default and acceleration on 20 March, making the $341 million that the trust had borrowed immediately payable.

The REIT froze trading of its stock on 24 March to “protect the interests” of security holders as the pandemic roiled markets, and EHT hasn’t resumed trading since. When sales and purchase of units in the REIT was suspended, EHT had been priced at $0.14 per stapled security – a 73 percent drop from its price of $0.52 one month earlier.

Singapore’s Central Bank on 21 April moved to safeguard EH-REIT shareholders as the country’s monetary authority directed the manager of EH-REIT and its trustee, DBS Trustee, to take steps to protect the rights and interests of EH-REIT’s unitholders. Federal authorities also announced that they were looking into possible breaches of relevant laws and regulations, as well as of listing rules in relation to the issues surrounding the REIT.

Earlier this month, Eagle Hospitality Trust’s managers said their current directors had attended interviews with the government officials as part of an ongoing joint investigation into the trust. The joint probe by MAS and the Singapore Police Force’s Commercial Affairs Department was in connection with suspected breaches of disclosure requirements under Section 203 of the Securities and Futures Act.