Eagle Hospitality Trust

Hi Karlmarx ,


Once again, many thanks for your sharing .

This good piece of journalism has uncovered important facts.

1) So the two Yuans who have been selling their stake were also the previous owners of at least 6 of EHT's assets. And also possibly the previous owners of 5 more, indirectly, since they advised UC on the acquisition of 5 other hotels.

2) The last known transaction for QM was US$43m, in 2007.

Questions for investors:

1) So now you have a "sponsor's sponsor" who is also a cornerstone investor. What is the nature of relationship between UC and the Yuans? Are they in it together, or was UC double-crossed?

2) UC couldn't have paid much more than US$43m for QM. More likely, they would have paid less, since it was a distressed sale. And so, UC's valuation of QM at US$159m is probably too rich. Was the difference of US$116m spent to improve QM?

It looks like more of the 'cockroaches' which some have mentioned earlier, has appeared.

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THE man who became Eagle Hospitality Trust's (EHT) single largest shareholder during its lukewarm initial public offering (IPO) was also the man who sold EHT's sponsor six of the 18 hotels that eventually formed its IPO portfolio, EHT confirmed on Thursday.


But as the seller, ASAP Holdings, had sold the six hotels to the sponsor's founders, who subsequently injected them into EHT soon after, there is no legal requirement to disclose their relationship, EHT also said.

Frank Yuan is EHT's largest shareholder and the chief executive of ASAP, a California-based acquisition advisory and asset management firm specialising in hotel assets.

Apart from the six hotels it sold, ASAP has also advised EHT sponsor Urban Commons on at least five other hotel acquisitions, said its website.

https://www.businesstimes.com.sg/compani...t-investor

For the complete article:

https://twitter.com/@MarissaLeeBT

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Insider selling continues.

https://links.sgx.com/FileOpen/_Form%203...eID=583940

https://links.sgx.com/FileOpen/_Form%203...eID=583942

Looks like the assets were grossly overvalued for the IPO  , now market is doing a revaluation exercise for the assets .

This sponsor really make a killing in their IPO . Winner takes all !

It is not likely that the Yuans and UC "did not know each other" prior to the IPO. Though, they may not have trust each other very much, either.

A possible narrative is that UC agreed to buy Yuan's 6 hotels at a higher than market price, and in exchange, Yuan agreed to subscribe to EHT shares during the IPO.

UC, having bought the 6 hotels at slightly inflated value, sells it to EHT at a yet slightly higher valuation. The basis of the higher valuation, as stated by EHT, was due to the master leases with UC. So in other words, UC may have offloaded the hotels at a higher valuation, but in exchange, had to agree to pay higher rents to EHT. 

The Yuans, who may have at first felt quit good about the deal, were alarmed when the reports surfaced on the potential liabilities that EHT is exposed to, due to UC possibly defaulting on the rectification works required for QM.

Possibly feeling quite upset that they were had by UC's possible overvaluation of QM, the Yuans decided to cut their losses by reducing their stake.

All these are, of course, just my speculation.

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The QM has long been known to be an old and ageing ship. The gulf in the estimated maintenance bill can be understood to represents different interests. 

On the one hand, there is UC, which is only interested in the ship being able to float, with plumbing and electricity; the bare necessities to function as a hotel. So you can expect them to want to keep capex as low as possible.

On the other hand, there are people who perceive UC and the City of Long Beach as being responsible for restoring the ship to  near seaworthy state.

The truth is probably somewhere between the two extremes. The ship may not need new hulls, but corrosion is an important issue which needs to be addressed, especially for a vessel which carries hundreds of people at any time.

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The larger concern for EHT, which should now be clear to most, is the long-term intent of UC. 

Does UC hope to create long-term value to unitholders? 

Was it UC's intention to offload assets at overvalued prices, and just slowly walk away? 

Will UC renew the master leases with EHT at more or less favourable rates, when they expire?

The hotel properties may be physically in existence. But will they fetch as much if put on the resale market?

If EHT's valuation is impaired, for whatever reasons, will there be a rights issue to maintain the gearing ratio?

And when EHT's loans are due for renewal, how will their bankers reprice them?

Investors should find out the P&L of the hotels leased to UC, to ascertain whether the rents that UC is paying to EHT is sustainable. This will then give investors a hint on how much rent UC will likely pay, when the master leases are renewed. If they are renewed.

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https://links.sgx.com/FileOpen/EHT%20-%2...eID=584184

http://voyagela.com/interview/meet-frank...-ca-91770/
JANUARY 22, 2018

Meet Frank Yuan of ASAP Holdings in Rosemead

Frank, let’s start with your story. We’d love to hear how you got started and how the journey has been so far.
We start to acquire hotels from last economic down turn 2012 – there are so many distress Hotels in the market place. The first few hotels are in Los Angeles and Northern California, such as Marriott Downtown L.A. Universal Sheraton, Doubletree San Pedro, Holiday Inn Disneyland, Embassy Suites Disneyland, and Doubletree Berkeley…etc. total around 17 hotels in California.

From 2012 to 2015, These California hotels we bought were way below replacement cost and our appreciation just for few years are more than 300% – 400%. From 2015 till now, we change our focus to out of states hotels with same buying criteria: Full Services Branded Hotel, Below Replacement Cost, Higher than 15% cash on cash return per year. Now we bought total 32 hotels all over United States of America, 12,000 or more rooms with total asset value more than $1.2 Billion.

(02-11-2019, 11:11 AM)tonylim Wrote: http://voyagela.com/interview/meet-frank...-ca-91770/
JANUARY 22, 2018

Meet Frank Yuan of ASAP Holdings in Rosemead

Frank, let’s start with your story. We’d love to hear how you got started and how the journey has been so far.
We start to acquire hotels from last economic down turn 2012 – there are so many distress Hotels in the market place. The first few hotels are in Los Angeles and Northern California, such as Marriott Downtown L.A. Universal Sheraton, Doubletree San Pedro, Holiday Inn Disneyland, Embassy Suites Disneyland, and Doubletree Berkeley…etc. total around 17 hotels in California.

From 2012 to 2015, These California hotels we bought were way below replacement cost and our appreciation just for few years are more than 300% – 400%. From 2015 till now, we change our focus to out of states hotels with same buying criteria: Full Services Branded Hotel, Below Replacement Cost, Higher than 15% cash on cash return per year. Now we bought total 32 hotels all over United States of America, 12,000 or more rooms with total asset value more than $1.2 Billion.

Urban Commons are owned by Howard Wu and Taylor. Howard Wu is the university buddy of Jerome Yuan, son of Frank.
Both Jerome and Howard made a fortune from investment in Silicon Valley. On the advice of Frank, they dabble into hotel investment.
And in 2016, Frank negotiated on behalf of Urban Commons with Long Beach City Council to secure the lease of Queen Mary.

(04-11-2019, 10:20 AM)Shiyi Wrote:

(02-11-2019, 11:11 AM)tonylim Wrote: http://voyagela.com/interview/meet-frank...-ca-91770/
JANUARY 22, 2018

Meet Frank Yuan of ASAP Holdings in Rosemead

Frank, let’s start with your story. We’d love to hear how you got started and how the journey has been so far.
We start to acquire hotels from last economic down turn 2012 – there are so many distress Hotels in the market place. The first few hotels are in Los Angeles and Northern California, such as Marriott Downtown L.A. Universal Sheraton, Doubletree San Pedro, Holiday Inn Disneyland, Embassy Suites Disneyland, and Doubletree Berkeley…etc. total around 17 hotels in California.

From 2012 to 2015, These California hotels we bought were way below replacement cost and our appreciation just for few years are more than 300% – 400%. From 2015 till now, we change our focus to out of states hotels with same buying criteria: Full Services Branded Hotel, Below Replacement Cost, Higher than 15% cash on cash return per year. Now we bought total 32 hotels all over United States of America, 12,000 or more rooms with total asset value more than $1.2 Billion.

Urban Commons are owned by Howard Wu and Taylor. Howard Wu is the university buddy of Jerome Yuan, son of Frank.
Both Jerome and Howard made a fortune from investment in Silicon Valley. On the advice of Frank, they dabble into hotel investment.
And in 2016, Frank negotiated on behalf of Urban Commons with Long Beach City Council to secure the lease of Queen Mary.

Closer look at EHT's portfolio following Nov 2 replies to SGX
The Edge Singapore 3/11/2019, 11:09am

SINGAPORE (Nov 3): Since August, Claydon Hill Investments and Compass Cove Assets have been selling their stakes in Eagle Hospitality Trust.  On Nov 2, EHT’s manager announced that Claydon Hill Investments subscribed to 141.44 million units at IPO, Compass Cove Assets subscribed to 120 million units and Bounty Green Assets 28.3 million units. As at Nov 2, Compass Hill has sold its stake down to 94.2 million units, and Claydon Hill Investments’ stake is down to 130.18 million units.
According to EHT’s announcement, the beneficial owners of Claydon Hill, Compass Cove and Bounty Green have a family relationship. Based on reports in the US press, Claydon Hill and Compass Cove invested in hotels on behalf of Chinese clients. They are also the managers/part owners of ASAP International Holdings whose unit Third Party ASAP6 Portfolio Vendors divested six hotels into EHT for the IPO process.
These hotels are: Sheraton Denver Tech Center, Crowne Plaza Dallas Near Galleria-Addison, Hilton Houston Galleria Area, Hilton Atlanta Northeast, Renaissance Woodbridge and Doubletree by Hilton Salt Lake City.
Crowne Plaza Dallas was purchased by ASAP for US$27.6 million ($37.4 million) and sold the hotel into EHT for US$50.7 million. Its adopted valuation in the REIT is US$57.8 million. ASAP acquired Renaissance Woodbridge for US$30 million and sold the property into EHT for US$67.1 million; the valuation adopted in the REIT is US$76.6 million.
ASAP acquired Doubletree by Hilton Salt Lake City in 2017 for US$31.38 million, the REIT acquired it for US$53.4 million at IPO and its valuation in the REIT is US$60.9 million.
Separately, questions are being asked about the repairs needed to keep The Queen Mary Long Beach operational. The lease agreement signed in 2016 between the City of Long Beach and Urban Commons – who is sponsor of EHT – is an annual rent paid to the City based on certain prescriptions such as base rent, pass through rent, percentage of net revenues and so on. The lease agreement calculates that the initial rent is around US$3.3 million a year. The 169-page lease agreement says the rents have annual escalations built in, in line with CPI. The lease is for 66 years.
In May this year, Urban Commons injected Queen Mary into EHT for which the REIT paid US$139.7 million. The major unitholders started to sell down EHT when memos and letters between the City and Urban Commons emerged in Sept and Oct, and the word default was mentioned in relation to repairs that need to be carried out by Urban Commons.
According to the lease agreement, the owner of Queen Mary allows Urban Commons to sublease the premises with Urban Commons securing the Landlord's prior written approval of all major subleases of above 20,000 sq ft.
While it is clear that the City owns the Queen Mary, it is not clear whether Urban Commons received permission to sublet the ship to EHT for US$139.5 million. In the event of default, the ship – presumably – reverts to the City.
Units in EHT are down a third to 52 US cents since its IPO price of 78 US cents. There is market talk that EHT’s manager may appeal to MAS for an early distribution of distributions per unit to unitholders after the release of its 3QFY2019 results instead of waiting till March 30, 2020. In addition, the EHT may announce a strategic review.

Wow, "strategic review" barely six months after listing! 
More bad news to come?

https://links.sgx.com/FileOpen/EHT%20-%2...eID=584509

CLARIFICATION IN RELATION TO RECENT MEDIA ARTICLES
 
Eagle Hospitality REIT Management Pte. Ltd., as manager (the “REIT Manager”) of Eagle Hospitality Real Estate Investment Trust (“EH-REIT”), and Eagle Hospitality Business Trust Management Pte. Ltd., as trustee-manager (the “Trustee-Manager”, collectively with the REIT Manager, the “Managers”) of Eagle Hospitality Business Trust (“EH-BT”), refer to recent media articles regarding EH-REIT.
 
In an article from The Business Times entitled “Eagle Hospitality Trust units hit fresh low as investors take flight” published on 5 November 2019 (“The BT Article”), it was stated that “EHT also told the SGX that the Yuans were introduced to Urban Commons by the IPO placement agents, although ASAP’s website suggests otherwise.” The REIT Manager would like to clarify that this statement, which suggested a negative connotation to EH-REIT, is factually incorrect.   
 
The actual response by the REIT Manager to SGX, which was announced on 2 November 2019 is as follows: “Mr Frank Yuan, Mr Norbert Yuan and Mr Jerome Yuan were introduced by the Sponsor to the placement agents during the bookbuilding process for the IPO and subscribed for Stapled Securities in the placement tranche at the IPO price of US$0.78 per Stapled Security as part of a bookbuilding process by the placement agents.”
 
To The Business Times’ credit, as soon as the REIT Manager informed The Business Times of the error, they promptly corrected the article and apologised for the error.

Separately, the REIT Manager would also like to clarify certain information which was put forth in The Edge’s article entitled “Closer look at EHT’s portfolio following Nov 2 replies to SGX” published on 3 November 2019 (“The Edge Article”).   By way of background, 6 assets in EH-REIT’s 18-asset portfolio acquired at the IPO are referred to in Eagle Hospitality Trust’s prospectus dated 16 May 2019 (“Prospectus”) as the ASAP6 Portfolio.
 
The Edge purported a deviation between: (1) the price at which EH-REIT acquired 3 assets within the ASAP6 Portfolio from Urban Commons (the “Referenced Assets”)1, and (2) the price that ASAP International Holdings (“ASAP”) originally paid for said assets (on average, 2.5 years ago in private transactions).
 
While ASAP’s original purchase prices for assets comprising the ASAP6 Portfolio have not been disclosed and are not known to the REIT Manager, the REIT Manager calls into question the values reported in The Edge Article, which we believe reflect the mortgage amounts at the time ASAP originally acquired certain of the Referenced Assets (and not the actual purchase prices). In this situation, the alleged purchase prices would not reflect the equity components of these transactions, thereby underestimating ASAP’s original purchase prices.
 
In addition, the REIT Manager does not think that the valuation comparisons made are representative, as it does not take into consideration: (1) a meaningful time lapse (again, approximately 2.5 years on average) since ASAP originally acquired the Referenced Assets, and (2) the significant capital invested and reserved since ASAP’s original acquisitions. As disclosed in the Prospectus, with respect to the Referenced Assets, approximately US$22.4 million2 was invested and reserved since ASAP’s original acquisitions.

Further, the REIT Manager would also like to highlight that the ASAP6 Portfolio has been valued by two independent valuers in connection with the IPO and that each of the 6 assets of the ASAP6 Portfolio were injected into EH-REIT at a discount of at least 12% to their adopted valuation as of 31 December 2018.  
 
The REIT Manager would also like to correct the following inaccurate statement made in The Edge Article: “While it is clear that the City owns the Queen Mary, it is not clear whether Urban Commons received permission to sublet the ship to EHT for US$139.5 million. In the event of default, the ship – presumably – reverts to the City.”  
This statement is incorrect in 2 primary ways: (1) as clearly articulated in the Prospectus, EH-REIT owns the leasehold interest to Queen Mary which it acquired at the time of the IPO (EH-REIT does not lease the ship from Urban Commons, but rather EH-REIT sub-leases the Queen Mary to Urban Commons with the express consent of the City of Long Beach), and (2) as referenced in the REIT Manager’s SGX responses on 28 October 2019 to clarify, in part, The Edge’s original article dated 23 October 2019 – in the event of a default by Urban Commons to make required repairs at the Queen Mary, EH-REIT reserves the right to cure the default and make the repairs itself at Urban Commons expense and/or to terminate the existing master lease and enter into a new master lease with a third party.

 Lastly, the REIT Manager also wishes to dispel a rumour reported in The Edge Article: there is no strategic review underway nor has any consideration of a strategic review been discussed with the Board.
 
In closing, the Board would like to highlight the following:
1. The portfolio is backed by master lease agreements for each asset comprising EH-REIT’s portfolio. Such master lease arrangements are typical for hospitality REITs listed on the SGX and are meant to enhance the stability of cash flow from the underlying hotel operations and provide a floor to protect investors from downside risk. The master leases in EH-REIT’s 18asset portfolio were designed based on each asset’s respective income productivity.
2. The income productivity of EH-REIT’s portfolio benefits from leading global hotel franchisors3 with the largest guest loyalty programmes and top independent hotel property management companies.
3. With regards to The Queen Mary, the Board stands by what was previously disclosed in the Prospectus and the REIT Manager’s announcements released on SGXNET, including previous clarifications to referenced media articles.
4. EH-REIT has been listed for less than 6 months on the Main Board of SGX. Prior to IPO, its portfolio underwent substantial due diligence conducted by competent and experienced professionals, including DBS Bank Ltd. as Issue Manager and other Global Coordinators.
5. To reiterate, EH-REIT’s portfolio is supported by valuations from two reputable independent valuers.
EH-REIT will be releasing its 3Q FY2019 results on 13 November 2019 after market close.