SG Wealth Builder

What a bad start for a REIT that barely got listed for six months! Debut in SGX only in May 2019, US pure-play REIT is facing some sort of crisis lately. At the centre of the storm is an astonishing article by The Edge Singapore revealing toxic inspection reports and a letter from the City of Long Beach to Urban Commons, sponsor of Eagle Hospitality Trust. In that letter, it was alleged that Urban Commons failed to meet obligations under The Queen Mary ground lease to make certain repairs required under the lease agreement.

The Queen Mary is one of the 18 properties held by Eagle Hospitality Trust, with valuation of USD159.4 million. Only Holiday Inn Resort Orlando Suites Waterpark, with valuation of USD162.8 million, carries a higher valuation. In this regard, The Queen Mary is one of the key assets of Eagle Hospitality Trust and the loss of this asset would likely have significant impact to Eagle Hospitality Trust.

Eagle Hospitality Trust in dark chapter

The 23 October article by The Edge Singapore spooked the hell out of investors and sent the unit price spiralling out of control. The counter fell from USD0.65 to USD0.55, prompting the manager to swiftly seek clarification with the sponsor. Subsequently, the latter confirmed that &ldquo they are not in default on The Queen Mary ground lease and that The Queen Mary remains safe and structurally sound&rdquo . It was also clarified that the letter from city of Long Beach is a formal request for request and not a notification for default.

On 28 October 2019, it was further confirmed that the total repair costs for The Queen Mary amounted to  USD7 million  and that Urban Commons will be responsible for costs involved. For sure, USD7 million is a small amount. Even if the sponsor is not willing to take up the responsibility for the repairs, Eagle Hospitality Trust can easily foot the bill with its $67 million cash on hand. With these in mind, investors of Eagle Hospitality Trust should be able to sleep better at night. Or is that so?

In my view, the issue of The Queen Mary had been blown out of proportion. But this is not to say Eagle Hospitality Trust is a good stock to invest in. A review of the financial results  revealed some very disturbing data which could provide the rationale for the sell-downs by the big boys.  In this article, I will share my insights on this data and explain why it scared the living daylight out of the big boys.

Investors must be aware of the big boys&rsquo movements for this counter to avoid getting caught with their pants down. Apparently, before the shambolic condition of The Queen Mary came to light, there were a series of sell-offs by the big boys in the preceding months.  And Temasek Holdings is one of the big boys.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in this counter before. Whether Eagle Hospitality Trust unit price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.