The operator for Long Beach’s Queen Mary plans to auction its lease for the historic ocean liner after filing for Chapter 11 bankruptcy in January following a string of financial problems.
In an announcement Tuesday, Singapore-based Eagle Hospitality Trust said it will sell 15 of the 18 hotels in its portfolio, including the Queen Mary, Sheraton Pasadena and Holiday Inn Anaheim for a starting price of $470 million in an auction set tentatively for May 20.
The city of Long Beach owns the Queen Mary but for decades has leased the ship to various operators, some of whom have met similar financial struggles.
Alan Tantleff of FTI Consulting, who was appointed as the chief restructuring officer in the bankruptcy, said Eagle has received an initial bid for the entire portfolio from a private investment firm called Monarch Alternative Capital. However, Eagle could choose to sell the Queen Mary or any of its properties individually in the auction, he said, adding that it has received multiple offers for the Long Beach landmark.
Tantleff said Eagle hopes to sell the Queen Mary lease individually to someone who recognizes the opportunities for development.
“The Queen Mary is a special asset that has tremendous redevelopment opportunity on the 45 acres of waterfront,” he said. “It’s a world-renowned asset and we hope the next custodian can allow it to reach its full potential.”
Tantleff said Eagle has been working with Long Beach city leaders and will remain responsible for the ship’s upkeep during the sale.
“The city of Long Beach has been extremely helpful in this process,” he said.
The city in a statement said it has “participated in the ongoing bankruptcy proceedings in order to protect this important city asset and will continue to do so.”
Eagle Hospitality filed for bankruptcy with a total of more than $500 million in debt on Jan. 18, as the COVID-19 pandemic has ravaged the hospitality industry. But the company showed signs of problems in 2019 before the pandemic, including a $341 million default on a loan from Bank of America.
Former Queen Mary operator Urban Commons, which signed a 66-year lease to run the ship in 2016, created Eagle Hospitality in 2019 to list on the Singapore Stock Exchange, with the goal of raising millions for a massive development project called Queen Mary Island.
But Urban Commons hit tensions with the board of Eagle Hospitality and its shareholders when it didn’t fulfill financial obligations and repeatedly failed to pay rent for its portfolio of hotel properties. The problems culminated in September, when Eagle Hospitality’s managers terminated the master lease agreements for Urban Commons’ hotels, including the Queen Mary—a move that essentially removed Urban Commons as the Queen Mary’s operator.
Urban Commons is now in legal disputes with Eagle Hospitality.
Meanwhile, the lease for the Queen Mary will change hands yet again as one of the biggest concerns remains the repairs and maintenance for the aging vessel.
A city-commissioned marine survey in 2015 projected costs of up to $289 million for urgent repairs over the next several years. Under its original agreement with Urban Commons, the city issued $23 million in bonds to fix some of the most critical repairs listed in the marine survey, but many of the repairs went over budget and the $23 million was spent before other critical projects could be addressed.
Long Beach City Auditor Laura Doud is conducting an audit on how the $23 million was spent. City officials have said they have documentation for the approved work.
Long Beach has a history of operators who have struggled to make the ship profitable.
Among the failed operators, Joe Prevratil, who signed a lease to run the ship in 1993, filed for bankruptcy in 2006 when the city demanded several million dollars in unpaid rent. Save the Queen LLC purchased the lease through an auction at bankruptcy and then defaulted on its loan in 2009.