The liquidation of Singapore’s Eagle Hospitality Trust has started raising some hard cash as Asia’s most beleaguered REIT on Monday announced the sale of five US hotels for an aggregate consideration of $155.4 million.
The five hotels among 15 EHT properties in Chapter 11 bankruptcy each were signed over to their respective bidders after being the only assets to receive qualified bids at a second-round auction held on 20 May.
Four of the hotel sales were completed last Thursday: Embassy Suites by Hilton Anaheim North for $33.1 million, Sheraton Denver Tech Center for $9.2 million, Four Points by Sheraton San Jose Airport for $41.1 million and DoubleTree by Hilton Salt Lake City Airport for $33.8 million. The sale of Hilton Atlanta Northeast for $38.2 million was due to close on Tuesday this week.
The sale of nine of the 10 remaining properties is expected to be completed by the end of this month, EHT’s trustee said in a filing with the Singapore Exchange. The net proceeds will be used to repay the debtor-in-possession financing that was obtained by the Chapter 11 entities holding the 15 properties under the bankruptcy process.
In early March, the Chapter 11 entities had struck a deal with a “stalking horse” bidder, an affiliate of distressed-debt specialist Monarch Alternative Capital, which agreed to buy the 15 properties for an aggregate consideration of $470 million.
During the second bidding round, Monarch determined that it would not buy the Queen Mary, a retired ocean liner moored at Long Beach near Los Angeles, lowering its agreed consideration to $455 million. No bidding took place for the ship.
In a statement to the Singapore exchange late Tuesday, EHT’s trustee said it had surrendered the Queen Mary to the city of Long Beach on 4 June. In a motion filed in a US bankruptcy court, entities belonging to EHT said they would reject lease and operational agreements related to the boat turned hotel.
EHT said it had filed the motion as it became apparent that the Queen Mary was no longer viable as a hospitality business under current circumstances.
In a stalking-horse bid, the seller and the prospective buyer agree on a lower-limit initial bid to prevent a third party from underbidding the purchase price. In the second round, Monarch itself entered the successful bid for Embassy Suites by Hilton Anaheim North, outdoing its own stalking-horse bid of $26 million. Third parties entered successful bids for the other four hotels.
Nine other properties received no qualified bids, and Monarch was deemed the successful bidder for those nine. The qualified bids boosted the aggregate purchase price payable by the respective successful bidders for the 14 properties (excluding the Queen Mary) to $481.9 million.
The auctioned properties represent the bulk of EHT’s 18-asset portfolio. The three properties not included in the stalking-horse deal are the Renaissance Woodbridge in New Jersey and two Texas hotels, the Crowne Plaza Dallas Near Galleria-Addison and the Hilton Houston Galleria Area.
EHT’s liquidation is finally underway after a January bankruptcy filing was followed by last-ditch legal actions by two of the trust’s former directors as they attempted to halt the auction and asset disposals.
Constellation Hospitality — an investor group that includes Howard Wu and Taylor Woods, who own EHT’s sponsor, Urban Commons — filed a motion in a US bankruptcy court on 19 May seeking to extend certain sales-related deadlines for the second bidding round and auction. The motion was denied, enabling the auction to proceed as scheduled.
Then on 24 May, Constellation filed an objection to the sale of the 14 properties in the same court, which overruled the objection, clearing the way for the disposals to proceed.
Constellation had earlier submitted a plan in which it offered to purchase 100 percent of the equity interests in EHT’s Chapter 11 entity, EHT US1 Inc, which Constellation had assigned a value of up to $470 million.
While the COVID-19 pandemic has thwarted efforts to sell hotel properties, EHT, which went public on the Singapore Exchange in May 2019, was already in breach of its financial covenants by November 2019, according to documents filed by Singaporean authorities.
Last October, six directors and former directors of EHT’s manager were arrested in Singapore in connection with a government investigation. Later that same month, the city-state’s central bank moved to remove the trust’s manager.