In a twist of fate, complaints have been filed in the US courts on Urban Commons, the sponsor of Eagle Hospitality Trust. Urban Commons is being   taken to court over alleged fraudulent transfers in one case, while in a second case, three companies are claiming monies for services rendered. At the same time, seven unitholders have petitioned the Monetary Authority of Singapore to Intervene on the disposal of 15 assets Under U.S. Bankruptcy Proceedings and instead to consider Urban Commons&rsquo backed proposal to acquire these Chapter 11 properties.  

 

Based on complaints filed in the US Courts, the latest being on May 24, 2020, Urban Commons is being asked for &ldquo recovery of fraudulent transfers&rdquo . According to a motion for preliminary injunctive relief in a US court by an entity Urban Commons Queensway (UCQ) which holds the Queen Mary Long Beach, it so turns out that Urban Commons applied and received a loan from the Paycheck Protection Program (PPP) of US$2.4 million. The loan was earmarked for mainly staff expenses by UCQ. Instead, Urban Commons deposited the monies from the PPP loan into its own bank account, according to filings in the US Court.

 

&ldquo Defendants Taylor Woods, Howard Wu, and EHT Asset Management, defrauded UCQ in May and June of 2020 by applying for and obtaining a PPP loan in the amount of more than US$2.4 million on behalf of UCQ&rdquo , the complaint said. The monies were to pay UCQ&rsquo s employees during the pandemic. Yet, according to the complaint, once Woods and Wu gained control of the loan proceeds, &ldquo they rapidly depleted them in a matter of weeks&rdquo .  

 

Interestingly, according to the complaint, money from the PPP loan was sent overseas. &ldquo In one striking example of Woods and Wu&rsquo s misuse of PPP proceeds&mdash and ability to quickly secrete funds from the US to accounts overseas- the purported PPP proceeds spreadsheet includes aggregate wire transfers of more than US$1.9 million between May 19, 2020, and May 28, 2020, to &ldquo Poh Altan (KP)&rdquo , with a wire description listed as &ldquo Oversea-Chinese Ban[k] . . . Poh Altan Resources Company Limite[d]&rdquo .   Upon information and belief, Oversea-Chinese Banking Corporation, is a banking corporation headquartered in Singapore, and   Poh Altan Resources Company Ltd. is a company controlled by Mr. KP Poh, the Director and CEO of Tian Poh Resources, a natural resources company headquartered in Australia, whose principal activity is the exploration of minerals in Mongolia,&rdquo the complaint says.  

 

In a separate, unrelated Chapter 7 claim, petitioners Selbert Perkins Design, Epic Entertainment Group and InterCommunications are together claiming US$1.024 million from Urban Commons for contracts for services.

 

Apart from the timing, for EHT&rsquo s unitholders and DBS Trustee there are mainly two issues at hand. On May 24, DBS Trustee announced the confirmed bids for some of EHT&rsquo s assets held during an auction process which need the permission of the US Bankruptcy Court for final approval, with a hearing on May 28. The permission is believed to be procedural, as DBS Trustee had already applied to the Court for Chapter 11 and the auction process, which had been approved.

 

The second issue is an appeal by seven members of an Informal Steering Committee who are EHT unitholders, to the Monetary Authority of Singapore to intervene on the disposal of EHT&rsquo s assets. The ISC wants the trustees to consider the proposal by Constellation Hospitality Group backed by Urban Commons. As background, it was the failure of Urban Commons to honour the master lease agreements that caused EHT and its properties (which are held under different companies) to file for protection from its creditors under Chapter 11.

 

Urban Commons had already filed an objection to the auction process, albeit unsuccessfully, when DBS Trustee first sought the Court&rsquo s approval to the auction process and timeline. Urban Commons filed a second objection in mid-May, asking for a hearing, which was denied. Now that the auction has been concluded, the ad-hoc committee comprising unitholders of EHT have filed an objection.

 

In reply to queries by unitholders as to why the trustee did not accept Urban Commons&rsquo bid for the Chapter 11 assets, DBS Trusteee says: &ldquo As set out in Update Announcement #29 dated May 24, 2021, the REIT Trustee, with the assistance of its professional advisers, gave due and careful consideration to Constellation' s proposal in the same manner as all other bids received under the Second Bid Round, and identified numerous shortfalls in relation to Constellation' s bid that required further clarification and corrections in order to make such bid a qualified bid. However, the required clarifications and corrections, including the required deposit, were never received.&rdquo  

FIVE out of 15 properties put up for auction have received qualified bids in the second bid round for Eagle Hospitality Trust' s (EHT) Chapter 11 assets held on May 20, announced the EHT' s trustee, DBS Trustee (see amendment note), on Monday.

 

In a bourse filing to the Singapore Exchange, the trustee said its Chapter 11 entities received qualified bids for Sheraton Denver Tech Center, Four Points by Sheraton San Jose Airport, Embassy Suites by Hilton Anaheim North, Doubletree by Hilton Salt Lake City Airport, and Hilton Atlanta Northeast.

 

The auction resulted in a US$24.8 million net increase in the aggregate consideration for EHT' s auctioned properties.

 

A " stalking-horse" bidder - Madison Phoenix LLC, an affiliate of Monarch Alternative Capital LP - emerged successful for its bid of nine non-auctioned properties with an aggregate purchase price of US$326.5 million.

 

This is in accordance with the terms of the stalking-horse agreement between entities of EHT and the bidder, which effectively sets an opening price or " price floor" to protect the company selling the assets at low bids.

 

Successful bids and back-up bids at the auction, along with the purchase by the stalking-horse bidder of the non-auctioned properties, are subject to approval by the United States Bankruptcy Court at a hearing scheduled for May 28, 2021.

 

Properties remaining in EHT' s portfolio upon approval of the sale would comprise Queen Mary Long Beach, Delta Woodbridge, Hilton Houston Galleria Area and Crowne Plaza Dallas Near Galleria-Addison.

 

In its announcement, the trustee said it will " continue to explore all available options" to EHT in respect of the remaining properties, and in the interests of all unitholders.

 

It added that Constellation Hospitality Group, LLC and a group of its investors, including owners of the trust' s sponsor Howard Wu and Taylor Woods, on May 19 filed a motion with the United States Bankruptcy Court to extend certain sales-related deadlines for the second bid round and auction.

 

Constellation had previously submitted a Chapter 11 plan bid through which it offered to purchase 100 per cent of the equity interests in one of EHT' s Chapter 11 entity, EHT US1, which Constellation valued at US$470 million.

 

The trustee had " identified numerous shortfalls" in relation to Constellation' s bid that " required further clarification and corrections in order to make such bid a qualified bid" but this, along with the required deposit, was not received.

 

Constellation subsequently filed an extension motion to extend the deadline for the submission of qualified bids. The motion was denied by the United States Bankruptcy Court on May 19, such that the auction proceeded as scheduled on May 20.

EAGLE Hospitality Real Estate Investment Trust (EH-Reit) will not be going ahead with the planned sale of a property in Texas, as the buyer missed the deadline for a deposit.

 

The sale and purchase agreement for Crowne Plaza Dallas Near Galleria-Addison (CPDG) was thus terminated on May 4, Reit trustee DBS Trustee said on Friday.

 

EH-Reit' s wholly-owned subsidiary will hold on to initial deposits of US$1.45 million in the aborted US$18.5 million deal with buyer Lockwood Development Partners.

 

Now that the April agreement has fallen through, DBS Trustee said that it is working with its professional advisers to explore " all available options in respect of CPDG, and will provide further updates on any material developments as and when appropriate" .

 

The freehold 428-room hotel is part of the portfolio of troubled Eagle Hospitality Trust (EHT), which comprises EH-Reit and the dormant Eagle Hospitality Business Trust.

 

Numerous EHT entities had filed for Chapter 11 bankruptcy in a Delaware court in 2021. But CPDG is not directly owned by a Chapter 11 entity, so it does not enjoy bankruptcy protection under Section 363 of the United States Bankruptcy Code.

 

Amid the Chapter 11 entities' " limited ability to support CPDG" , the decision was made to sell off CPDG, in the face of potential difficulty fetching a higher price in an auction, and the risk that a lender would foreclose on the property after mortgage loan defaults.

 

But the EH-Reit unit involved in the sale axed the agreement as the buyer did not meet the May 3 deadline for an extra deposit of US$1.05 million, DBS Trustee has now said.

 

The buyer and the seller have no further rights or obligations to each other under the sale and purchase agreement, except for " certain surviving provisions" .