SINGAPORE (May 22): This afternoon, we received an open letter from a unitholder of Eagle Hospitality Trust. The unitholder is clearly concerned that interest payments on the REIT’s loans - US$506.6 million as at Dec 31, 2019- may have been suspended, and the loans may be in default. In fact, in a filing to the SGX, EHT’s manager has already said that EHT has already defaulted on a US$341 million loan because the sponsor, Urban Commons which has two shareholders, Howard Wu and Taylor Woods, did not honour its master lease payments to the trust.
We had drawn unitholders attention on a few occasions to EHT’s valuation. The first warning sign was the manner in which Queen Mary Long Beach, where the sponsors pay a lease to the City of Long Beach of just US$300,000 a year, was sold into the REIT for around US$139.7 million and valued at US$159.4 million. The sponsors would have collected around US$565 million from the IPO proceeds.
Because of the loan default the unitholder suggests that EHT needs a white knight to come in as soon as possible to stabilise the position. “The position” refers to protection from creditors or judicial management for the REIT to reorganise its debts and its interest payment schedule.