DBS Selects SC Capital as Replacement Manager of Troubled SG Hotel Trust

Singapore’s primary finance regulator today ordered the removal of the manager of Eagle Hospitality Trust in a measure aimed at remedying the woes of the troubled hotel REIT.

The judgement by the Monetary Authority of Singapore (MAS) had been expected after the government office in late October notified the REIT’s manager and its trustee, DBS Trustee Ltd, of a plan to put the trust in new hands after what it termed numerous breaches of the country’s Securities and Futures Act (SFA).

In an announcement on the Singapore exchange today in response to the MAS decision, DBS Trustee indicated that it has identified SCCPRE Hospitality REIT Management Pte Ltd, a fund manager under Suchad Chiaranussati’s SC Capital Group as the proposed new manager for Eagle Hospitality Trust.

The Monetary Authority’s move this week came after six of Eagle Hospitality Trust’s current and former directors were arrested in October on suspicions of violations of the Securities and Futures Act. The directors were later released on bail and then in November the listed trust revealed that it had received notices of default on loans linked to two of the properties in its portfolio.

MAS Dismisses Update From Outgoing Manager

In announcing its intention to remove the hotel REIT’s manager the Monetary Authority had given the existing manager, Eagle Hospitality Trust Management Ltd, and DBS Trustee Ltd until 9 November to make their case for keeping the trust under its current supervision.

DBS Trustee, which is a unit of Singapore’s largest bank, had indicated that it intended to follow government directives regarding replacement of the manager. In its notice today, the MAS said that it had received written submissions from Mandarin West Holdings, a shareholder in the current manager, but indicated that these raised “no new material facts.”

In its notice today, the Monetary authority said that it, “continues to have serious concerns with EH-REIT Mgt’s ability and commitment to comply with MAS’ rules and regulations, given the numerous breaches of the Securities and Futures Act, including recurrent and ongoing breaches of capital and financial requirements.”

DBS Pick SC

In selecting SC Capital as the new manager for Eagle Hospitality Trust, DBS Trustee pointed to the investment manager’s experience in managing hotel trusts, its network in the hospitality industry and its ability to raise capital as reasons for favouring the Singapore firm’s proposal.

Since the October notice from the MAS, DBS Trustee had been evaluating proposals from potential replacement managers ready to take on the challenges of a hotel REIT which had dipped below its minimum capital requirements less than six months after holding its IPO on the Singapore exchange in May of last year.

SC currently controls the managers of two listed real estate investment trusts in the region, Japan Hotel REIT Investment Corporation and Thailand Prime Property Freehold and Leasehold REIT, according to the DBS statement.

Following the selection of SC as the preferred candidate, DBS Trustee indicated that it will still need to finalise the terms of the management agreement. SC’s hospitality REIT management unit will also need to secure regulatory approvals and relevant licenses, as well as the support, approval and consent of various stakeholders.

The final step toward righting the hotel REIT would be securing approval from the trust’s stapled securityholders at an extraordinary general meeting, although no date for such a session was specified in today’s announcement.