SINGAPORE (May 15): Eagle Hospitality Trust said it has found additional agreements made between on one hand between Howard Wu and Taylor Woods, and certain hotel managers on the other, that were made without EHT&rsquo s knowledge.

 

Wu and Woods are the co-founders and principals of EHT&rsquo s sponsor Urban Commons. They wear another hat as the master lessor to some of the hotels that form part of EHT&rsquo s portfolio. 

 

Broadly, the master lessors have assumed more obligations in the deals with the hotel managers than usual and therefore &ldquo prejudicial&rdquo toEHT&rsquo s minority unitholders.

 

Six of these so-called Further Non-Disturbance Agreements were listed.

 

FTI Consulting, appointed by EHT to help restructure the entity, has identified &ldquo value at risk&rdquo of some US$24.8 million for FY2019 and US$23.26million for FY2020.

 

&ldquo The CEO and the Independent Directors of the Board(being the members of the Special Committee which was subsequently constituted and announced in the 1 April 2020 Announcement) and the REIT Trustee were not aware of any negotiations of nor the execution of any of the Further Non-Disturbance Agreements by the relevant Master Lessors until they were recently informed of the same by their United States legal counsel,&rdquo said EHT. 

 

In response to this update from EHT, SGX RegCo urges EHT&rsquo snominating committee to consider if Wu and Woods are still deemed &ldquo suitable&rdquo to stay on the board of EHT&rsquo s manager. Wu and Woods are the chairman and deputy chairman respectively of the board of Eagle Hospitality Reit Management. 

 

&ldquo The Special Committee and the REIT Trustee are currently consulting their professional advisers as to the appropriate course of actions to be taken as regards the Further Non-Disturbance Agreements and the relevant Master Lessees,&rdquo said EHT. 

 

In a separate announcement, EHT has reported a loss of US$8.88 million for 1QFY2020, as it was forced to make an impairment for rental its master lessee was supposed to pay but didn&rsquo t. At the time of its IPO, EHT had forecasted earnings of US$11 million for this quarter. Revenue in the same quarter was US$16.59 million, 24.4% lower versus the projected figure of US$21.94 million. 

 

Besides the operational problems caused by the Covid-19 outbreak, which hurt the US hospitality industry, EHT is also warning investors that it faces a host of other risks.   For example, due to the outbreak, the earlier forecasts were no longer valid. EHT also said the CMS license of the Reit manager may be cancelled by the Monetary Authority of Singapore. 

 

Under the so-called further non-disturbance agreements, the master lessors supposedly agreed to guarantee the payment and performance of all the master lessees&rsquo obligations, with some exceptions. They would also assume all the obligations of the master lessees if the master lease agreements were to be terminated - even obligations that pre-dated such terminations. "