The manager of Eagle Hospitality Trust delivered some scary news to shareholders just before Halloween, revealing to the Singapore stock exchange on Friday that it had received notices of default on loans linked to two of the properties in its portfolio.
Already set to have its manager replaced by Singapore’s central bank, the troubled hotel REIT now says that lenders to a Crowne Plaza Hotel in Dallas and a Hilton in Houston are demanding payment for mortgages on the two properties.
The Dallas default amounts to $12.9 million, including interest, and, as of 31 December last year, the REIT owed $27.6 million on the Hilton Houston Galleria.
The defaults were announced just three days after the Monetary Authority of Singapore announced that it intends to replace the listed trust’s manager this month due to what it termed, “serious concerns over its ability to comply with rules and regulations.”
Texas Hotel Defaults
In its statement, Eagle Hospitality Trust’s manager said that Wilmington Trust NA, which holds the mortgage on the Crowne Plaza Near Galleria-Addison, had notified it that, due to its failure to make payments on the loan when due, it is now demanding immediate payment of all amounts.
The lender is said to have already drawn upon a cash reserve previously set aside to pay down a portion of the loan, with $12.9 million still outstanding. According to a notice on that hotel’s website the Crowne Plaza has been closed since 27 May, due to the COVID-19 pandemic.
Wells Fargo Commercial Mortgage Trust holds the loan on the Hilton Houston Galleria and has notified Eagle Hospitality Trust’s manager that it is in default due to its failure to make payment when due on the mortgage. The lender is said to be demanding immediate payment of past due amounts, but has not yet called in the loan in its entirety, according to the manager’s statement. That hotel is also currently closed.
In its announcement to the exchange, the manager said that it was working together with its professional advisors to assess the implications of the default notices and is discussing potential forbearance options with the lenders.
Franchise Agreements Extended
In more positive news, Eagle’s manager, in the same statement, said that it had received extensions on potential termination of the master franchise agreements for eight of 10 properties where franchisees had previously submitted termination notices due to defaults by affiliates of the trust.
The franchisees of the Sheraton Pasadena, the Westin Sacramento and four other hotels have all extended the termination dates for the franchise agreements to 30 November this year, after earlier pushing that deadline to 30 October.
A pair of Holiday Inn properties, one each in Orlando, Florid and San Mateo, California, have extended their franchise termination deadlines to 11 January of next year.
The hotels properties are all held by master franchisee lessees, which are responsible for making payments to the hotel franchisors, with the trust’s manager having announced on 14 August that it had received termination notices from the 10 franchisors. The trust holds 18 hotel properties in total.
DBS Promises Takeover Candidate
Just two days before the trust manager’s Friday announcement, DBS Trustee Limited, which is the trustee for the SGX-listed REIT had announced that it intends to follow government directives regarding a potential replacement of Eagle Hospitality Trust’s manager, with a new manager expected to be named soon.
The Monetary Authority of Singapore had moved to find new management for the hotel REIT after it committed multiple breaches of the country’s Securities and Futures Act, according to an official statement last week. Those breaches, which started last year within six months of the trust’s IPO included dipping below the minimum capital and financial resources requirements, among other violations, the MAS said.
DBS Trustee indicated that a request for proposal process for a potential takeover of Eagle Hospitality Trust which had begun three months ago, was ongoing. The unit of Singapore’s largest bank said that interested bidders had been given the opportunity to refine proposals submitted by 31 August and that it expects to name a final candidate imminently.
That candidate is expected by DBS Trustee to be named the replacement manager of Eagle Hospitality Trust, subject to necessary approvals.