The company that leases the Queen Mary is seeking to generate up to $566 million by going public on the Singapore Stock Exchange, the Post has learned.
It remains unclear whether any of that expected windfall would be directed toward urgent repairs of the 83-year-old ship or completing ambitious development plans for the 65 acres around it.
But Urban Commons, which signed a lease to run the city-owned ship in 2016, released an 888-page preliminary financial document on Thursday ahead of its public offering that provides the clearest picture yet of the company’s revenue and projections for 12 of the hotel properties it owns or manages, including the storied 1930s-era ship that sits along Queensway Bay. Some previously unknown disclosures include:
- The Queen Mary is the most lucrative property in Urban Commons’ hotel portfolio. The publicly-owned ship accounts for roughly a fifth of the company’s gross profits, and figures heavily in Urban Commons’ pitch to investors.
- The ship continues to be a money-maker for the company. Last year, it generated $11.2 million in gross profit, up from $6.5 million in 2017. Key drivers included the reopening of newly-renovated restaurants, increased concert revenue and more visitors.
- Revenue and profit projections for the Queen Mary are even stronger in future years, with forecasts estimating $78.2 million in total revenue and $23 million in profit for 2020. Much of that rise in revenue is expected to come from special events on the ship, parking fees and concerts promoted by Goldenvoice, not necessarily hotel stays.
Another revelation is what the Queen Mary is worth; the documents show an outside assessment valued the ship and the surrounding land at about $160 million.
That is significantly less than the $289 million it could take to fix all the maintenance problems aboard the ship—most of them deemed urgent—that were outlined in a 2017 survey of the ship. (Urban Commons has previously disputed that figure, saying repairs will cost far less.)
Dan Zahroni, chief development officer for Urban Commons, declined to comment in an email Friday. Once publicly-traded on the Singapore Exchange the company will be listed as Eagle Hospitality Trust, sponsored by the privately-held Urban Commons.
City officials said they fully expect the company to invest proceeds from the Singapore offering into Long Beach.
“They have obligations to continue to work through basic maintenance and capital improvements,” said John Keisler, director of development services for the city. “They’re on the hook for it. We expect they would use proceeds to shore up the integrity of the Queen Mary, and also to develop the property.”
The proceeds raised from the public offering will be used to pay the costs of the IPO itself and a set-aside for unspecified capital funding, according to the disclosure. Separately, the prospectus also reports the company is expected to create headroom leverage for additional debt of up to $170 million, which could help fund future capital investments or acquisitions.
Queen Mary Island
Urban Commons in 2017 announced major expansion plans for the acres surrounding the ocean liner. Dubbed Queen Mary Island, the proposed entertainment complex has a construction price tag of at least $250 million and promises a series of shops, promenades, amusement rides, in addition to hundreds of new hotel rooms.
The lengthy and detailed prospectus released this week does not, however, include Queen Mary Island in a list of projects planned at five hotels through 2020.
Urban Commons has submitted a “master development plan” to the city, and officials are currently reviewing it, said Johnny Vallejo, property services manager for the city.
The lease requires Urban Commons to develop the land within 15 years.
The development of Queen Mary Island is critical to projections that show growth in revenue from the ship and surrounding land. The financial document also boasts of continued renovation of rooms and public spaces and offering “valuable” sublease opportunities.
In the documents released this week, Urban Commons told potential investors that $23.5 million had been spent in 2017 and 2018 to improve the ship and its amenities. The source of that money was the city, which the company does disclose.
But there is no mention that the money was intended to be used to fix immediate, urgent problems on the ship—including inoperable fire sprinklers—many of which ran significantly overbudget.
In its lease agreement, Urban Commons agreed to forgo an estimated $2.15 million annually from passenger fees at the Carnival cruise line that uses part of the property. The money is instead diverted to a special fund that will pay off the bonds the city sold to front the $23.5 million.
A portion of the passenger fees will eventually be used to complete additional work called for in the 2017 Marine Survey.
Keisler said both the city and Urban Commons have access to that fund, and officials closely monitor the accounting and what is being done to fix the ship.
According to the financial documents this week, Urban Commons pays the city about $10 million a year in rent, but Keisler said that likely also includes the passenger revenue being diverted for repairs.
The Queen Mary arrived in Long Beach in 1967. It has proved to be an expensive acquisition from the start.
The conversion of the ship to a 347-room hotel and attraction was “poorly executed,” according to the 2017 marine survey, leaving the ship structurally undermined for decades to come.
Several developers and leaseholders over the last five decades—including The Walt Disney Co.—have failed to come up with viable plans for the land surrounding the ship. One operator filed for bankruptcy protection, and at one point the Harbor Department recommended selling the ship.
A key factor in deciding to lease to Urban Commons was its ability to fund development of the land, city officials said.
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