EAGLE Hospitality Trust (EHT) has rejected allegations by a lender, Lodging USA Lendco, and its affiliated entity Claydon Hill Investments, that EHT had falsely disclosed in a circular that Lendco had not demanded payment for an US$89 million unsecured loan.

 

In letters sent to EHT managers, the two entities alleged that Lendco has in fact demanded payment and gave notice to EHT of its defaults under the loan, including directing a notice of default to the embattled hospitality stapled group on Aug 14.

 

Among other things, Delaware-based Lendco and Claydon Hill also alleged that EHT had not sought Lendco' s consent before advancing its proposal for a bridge facility to be obtained from a consortium of banks led by the Bank of America, for purposes of funding a property-level budget.

 

They also accused EHT for engaging in " other bad faith conduct" in violation of its obligations to Lendco, which has " materially prejudiced" Lendco' s rights. These allegedly include failing to advise Lendco of material changes to EHT and wrongfully conducting negotiations with other lenders without Lendco' s consent or involvement.

 

In a Singapore Exchange filing on Tuesday, EHT' s managers and trustee said the allegations were without merit.

 

The managers, trustee and their respective professional advisers said they are investigating the alleged false disclosure as " none of them have any record of any alleged notice relating to the default under or repayment of the unsecured Lendco loan" .

 

The managers and trustee added that EHT' s proposed bridge facility does not require Lendco' s consent, nor does it constitute a breach of any of Lendco' s rights.

 

There is also no obligation on EHT' s part to advise Lendco of any material changes to EHT, they asserted, adding that EHT has not wrongfully conducted negotiations with other lenders.

 

EHT also announced that a lender has applied to appoint a receiver in relation to a default on a mortgage loan related to the Hilton Houston Galleria Area hotel.

 

EHT' s managers and trustee said they are assessing the implications of the application, and are consulting professional advisers to determine their next course of action.

 

In addition, EHT said that certain master lessors of California-based properties - Holiday Inn Hotel & Suites Anaheim, Four Points by Sheraton San Jose Airport, Embassy Suites by Hilton Palm Desert and Embassy Suites by Hilton Anaheim North - have received letters of request from certain master lessees to initiate private arbitration.

 

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EAGLE Hospitality Trust (EHT) will not hold a further extraordinary general meeting (EGM) to vote on a rights issue and a proposal to retain or reappoint the current manager of Eagle Hospitality Reit (EH-Reit).

 

This is because the Monetary Authority of Singapore (MAS) has rejected the appeal against its directive to DBS Trustee to remove Eagle Hospitality Reit Management and appoint a new manager for the Reit within a month from Nov 30.

 

As a result, the Reit manager considers there to be no legitimate basis for the proposed EGM and the resolutions proposed to be voted on, it said in a bourse filing on Wednesday.

 

The further EGM had been requested by entities controlled by EHT' s former non-executive chairman Howard Wu and former non-executive deputy chairman Taylor Woods, who said they wanted to offer EHT security-holders an alternative to DBS Trustee' s plan for the trust' s revival.

 

EHT will proceed with its scheduled EGM on Dec 30 as planned, and no additional resolutions will be tabled besides the ones set out in the circular despatched to stapled security-holders.

 

EH-Reit and Eagle Hospitality Business Trust together constitute EHT. Trading in EHT' s stapled securities have been voluntarily suspended since March 24 this year.

IN A response to queries from the Singapore Exchange (SGX), Eagle Hospitality Reit (EH-Reit) on Tuesday attributed a nearly 40 per cent fall in its portfolio value since listing to a challenging outlook due to the Covid-19 pandemic, as well as comparatively higher risks in the markets where the properties are located.

 

EH-Reit reported a 38.1 per cent decline in its portfolio value in a Dec 8 circular that it issued about a proposed change of managers, related matters and a termination proposal. This fell outside the projected average decline in values across the US, which the independent valuer expected to range between 15.1 per cent and 28.1 per cent.

 

EH-Reit' s manager said the range was " not meant to be all encapsulating but a general view provided by surveys conducted by industry experts at the time" , and that because of the uncertain outlook, declines are likely to vary from market to market.

 

For example, EH-Reit' s Queen Mary Hotel has high exposure to the mass events and groups business, a sector that is expected to take longer to recover.

 

The manager added that the independent valuer had considered investors' demand for additional risk premiums to reflect the near-term soft outlook, increased cost profile and recovery timeline for the industry. As a result, it used a higher and wider range for the terminal capitalisation rate and discount rate than it did in 2018, prior to EH-Reit' s initial public offering (IPO).

 

Market fundamentals have also changed significantly since the IPO. While revenue per available room was up 2.9 per cent year-on-year at the end of 2018, it is forecasted to finish 2020 down 57.5 per cent from 2019.

 

SGX also queried the increases of 2 per cent or more in capitalisation rates for seven of EH-Reit' s properties, and asked what the new managers' plans would be to reduce the capitalisation rates.

 

EH-Reit' s manager said the increase in capitalisation rates was a result of the current market dynamics, in which yields being demanded for hotel assets have increased because of Covid-19 and investors factoring in recovery time.

 

It expects improvements in capitalisation rates to be driven primarily by general market improvements and market recovery in hospitality, as well as the securing of credible and creditworthy third-party master lessees for the hotels in the medium to long term. The independent valuer defined " medium term" as the next five to seven years.

 

In the near term, capitalisation rates will likely be brought down by increases in net operating income through proactive asset management initiatives, the manager said.

 

Trading in Eagle Hospitality Trust' s stapled securities - comprising EH-Reit and Eagle Hospitality Business Trust - was voluntarily suspended on March 24 this year.

 

Urban Commons, the sponsor of Eagle Hospitality Trust (EHT), says it believes SC Capital&rsquo s current proposal is &ldquo very likely&rdquo to provoke disagreements among various interested parties.

 

SCCPRE Hospitality REIT Management, which is part of the SC Capital Group, was proposed as the new REIT manager for EHT by DBS Trustee on Dec 1.

 

In a statement dated Dec 22, Urban Commons says it has provided recommendations to &ldquo save the REIT&rdquo , that were ignored by DBS Trustee.

 

&ldquo A substantial amount of EHT&rsquo s cash, approximately $25 million, has been spent on professional consultants who are, surprisingly, not collaborating with the Sponsor to find a way forward for the benefit of securityholders,&rdquo says Urban Commons in a statement.

 

&ldquo The Sponsor believes that all interested parties should work together to resolve issues for the good of all securityholders,&rdquo it adds.

 

Urban Commons further elaborated that it intends to restructure the current REIT manager in a bid to the REIT&rsquo s strengthen management status and cash position.

It says that it will propose a new partner to the manager, which is subject to the approval of the Monetary Authority of Singapore (MAS).

 

&ldquo We hope that DBS Trustee will make the right decisions to protect the interests of all securityholders. On the other hand, we are working hard to engineer the best deal possible for securityholders, by considering a variety of different options for the REIT. This includes a whole spectrum of possibilities, such as the possible entry of a white knight, as well as the potential refinancing or a unique recapitalization plan that suits this unique scenario,&rdquo says Howard Wu, founder and principal at Urban Commons.

 

&ldquo While securityholders may feel they are left with few choices, we believe that presenting additional options at our proposed EGM will help them see the potential for their REIT, as well as our continued commitment to help weather the storm,&rdquo Wu adds.

THE Monetary Authority of Singapore (MAS) confirmed on Sunday that the appeal from the shareholder of Eagle Hospitality Reit' s (EH-Reit) manager regarding the directive on its removal has not been accepted.

 

MAS' s earlier direction to DBS Trustee on Nov 30 remains in effect and the trustee is required to comply with the direction, said an MAS spokesperson.

 

Mandarin West Holdings (MWH), the sole shareholder of EH-Reit' s manager, had on Dec 10 filed an appeal to Finance Minister Heng Swee Keat against its removal.

 

The directive from MAS dated Nov 30 instructed the trustee of EH-Reit to remove EH-Reit' s manager within one month from the date of issuance of the directive, or such longer period that MAS may approve in writing, and appoint a new manager for EH-Reit

 

Following the directive, SCCPRE Hospitality Reit Management was identified earlier this month as the proposed new manager.

 

MAS' s directive follows a Notice of Intention issued on Oct 26 on the removal, in view of " numerous" breaches of the Securities and Futures Act by EH-Reit' s manager, as well as " serious concerns" over the manager' s ability to comply with rules and regulations.

 

MAS said last month it received written submissions from MWH in response to the notice and had " carefully considered" these. However, as the written submissions raised " no new material facts" , it proceeded to issue the directive to DBS Trustee.

 

Trading in Eagle Hospitality Trust' s stapled securities - comprising EH-Reit and Eagle Hospitality Business Trust - was voluntarily suspended on March 24 this year.