Long Beach, California 2021-01-23 12:00:04 –
Bankruptcy proceedings against the Queen Mary operator will begin in a Delaware court on Thursday and may last for several weeks as Long Beach city leaders consider the possible consequences of a historic ocean liner.
The future of the ship is uncertain when the Queen Mary and Singapore-based Eagle Hospitality Trust entities, which operate 20 other hotel facilities across the United States, file for bankruptcy with a total debt of more than $ 500 million. I did.
Long Beach has owned a ship 100 years ago since it arrived from Scotland as a hotel and tourist attraction in 1967. FOr for decades, the city leased ships to various operators in charge of maintenance, and many of those operators met as well. Economic struggle.
Now, the fate of the Queen Mary is uncertain again.
In an interview this week, Long Beach City Manager Tom Modica said Eagle Hospitality is obliged to maintain the vessel daily and long-term projects under a lease agreement.
Under Chapter 11 Bankruptcy, Eagle Hospitality will be restructured to bring companies to the surface and repay creditors. Modica said he hopes Eagle will choose to maintain the Queen Mary lease as it lists the ship in court documents as one of the most valuable assets, the city said. He added that he needed to know more in the coming weeks.
“We will do everything necessary to protect our interests and the interests of the general public in keeping the ship in good condition and ensuring that the lease is fulfilled,” Modica said. Said.
Long Beach may take legal action if Eagle fails to meet its leasing obligations. The city council will discuss options at a public meeting in February.
The hospitality industry was devastated by the COVID-19 pandemic, but Eagle Hospitality showed signs of problems in 2019, including a $ 341 million default on loans from Bank of America, before the pandemic.
Urban Commons Problem
Bankruptcy is the latest issue for the Queen Mary since Los Angeles-based real estate investment firm former operator Urban Commons signed a 66-year lease to operate a vessel in 2016.
In 2019, Urban Commons established Eagle Hospitality as a Singapore Stock Exchange-listed real estate investment trust with the goal of raising millions of dollars for a large-scale development project called Queen Mary Island.
However, the company was in a tense situation as it failed to meet its financial obligations and repeatedly pay rent for its hotel portfolio between Eagle Hospitality’s board of directors and its shareholders. The problem culminated in September, when Eagle Hospitality managers terminated master leases for hotels in Urban Commons, including The Queen Mary. As a result, Urban Commons has been effectively removed as the operator of the Queen Mary.
According to court records, Urban Commons is currently in a legal dispute with Eagle Hospitality. In this week’s statement Urban Commons said it has fulfilled its financial obligations to Eagle Hospitality and that the lease agreement includes provisions such as COVID-19 that allow rent to be paid during a pandemic.
“We have united in these uncertain times and have done our best to work together amicably to promote the best chances of survival and success,” the company said. “”COVID-19 has hit our property hard, but we are not the scapegoat of its influence. Still, these claims to us began only after the outbreak of the pandemic. “
Problems have also arisen with the principals of Urban Commons, Taylor Woods and Howard Woo. In September, it was revealed that Woods had improperly applied for a Federal Paycheck Protection Program (PPP) loan of over $ 2 million to Queen Mary without first notifying the Eagle Hospitality manager.
Woods said it was a clerical error, but according to bankruptcy court filings, the issue has not yet been resolved.
In a court document, the debtor’s chief restructuring officer, Alan Tantrev, said the case was “in line with the behavioral pattern of Woods and Wu using the Queen Mary entity to benefit the Urban Commons. They should never have suffered. “
The document also states that debtors are investigating the relationship between Woods and Wu and an entity called Rosing USA, which has the largest lender claim in bankruptcy for a $ 89 million pending loan. I will.
Keep the ship
One of the city’s biggest concerns is repair and Maintenance of the aged Queen Mary.
A An oceanographic survey commissioned by the city in 2015 estimates that emergency repairs over the next few years will cost up to $ 289 million. Under the initial agreement with Urban Commons The city has issued $ 23 million in public debt to fix some of the most important repairs listed in the marine survey, but many Of the repairs, $ 23 million was spent over budget and before working on other important projects.
The city later dismissed long-time Queen Mary inspector Ed Pribonic after issuing a series of critical reports on the condition of the ship and criticizing the Urban Commons for ignoring the ship.
Long Beach City Auditor Laura Daud is currently auditing how $ 23 million was spent. However, city officials say they have a document of approved work.
“We absolutely had to do $ 23 million in repairs,” said John Keithler, director of economic development at Long Beach. “The ship is in better condition than it was decades ago.”
Keithler said the Queen Mary did not require extensive maintenance as the COVID-19 pandemic closed the ship and its hotel since May. Future funding for the repair project is also at a loss as the project is primarily funded by passenger fees from a nearby Carnival Cruise Terminal, which remains closed due to the pandemic.
Nonetheless, Keithler said Eagle Hospitality has expressed a commitment to repair the ship and is obligated under a lease agreement.
Hope for the Queen Mary
Long Beach has seen the unfortunate history of operators who failed to maintain their vessels and struggled to make a profit.
Among the unsuccessful operators, Joe Prebratil, who signed a lease to operate a ship in 1993, filed for bankruptcy in 2006 when the city demanded millions of dollars of unpaid rent. Save the Queen LLC bought the lease through an auction in the event of bankruptcy and defaulted the loan in 2009.
The city has been wrestling with operators, but Modica said using them is still the best option. Under the lease agreement, the operator will generate funds to maintain the Queen Mary through passenger rates for events, hotels and carnivals. He said the city wasn’t using taxpayer funds to keep the ship.
“Another option was to take over the Queen Mary and put the public taxpayer’s dollars on board. This was not our intention to operate the ship that way,” Modica said. Told.
Urban Commons purchased the lease by default in 2016, increasing the likelihood of developing the surrounding 65 acres into a $ 250 million entertainment destination known as The Queen Mary.
In the Urban Commons at that time portfolio Of the 18 hotels nationwide, none were direct experience On a large scale Queen Mary Island scale development project.
But the city leaders had hope Since then The company has an impressive portfolio of hotels, bringing famous designers and architects like Gensler to the company. Proposal, Modica said.The company also had Modica added Long Beach, saying it seems ready to raise money from trusted lenders and attract investors. have Seen elsewhere success Public-private partnership like Of the city Newly built Civic Center.
“At the time we did some judging, but the team seemed to be able to do this,” he said. “If we didn’t feel that way, we wouldn’t have moved forward.”
Modica said the Queen Mary’s future is linked to the development of a revenue-generating surrounding waterfront. However, this is also one of the biggest challenges, as the region faces stricter environmental regulations and is difficult for visitors to access.
Under the lease agreement, Eagle Hospitality is currently obliged to develop land, but Keithler said he was optimistic that another Queen Mary suitor could see the possibility if Eagle dropped out.
“The reason they are willing to accept this is because of the opportunity to develop real estate on the Southern California waterfront,” Keisler said. “And I think you can get it either in this group or in another group, depending on the results of these next few weeks.”