A principal for Urban Commons, which operates the Queen Mary, has been accused of applying for a more than $2 million federal Paycheck Protection Program (PPP) loan without first notifying the managers of its publicly-traded entity on the Singapore Stock Exchange.
Urban Commons, a Los Angeles-based real estate and investment firm, has been marred in financial problems since it signed a lease to run the city-owned landmark in 2016.
The company, which created Eagle Hospitality Trust in 2019 to list on the Singapore Stock Exchange, and has since clashed with trust managers who have cited the company for repeated defaults and not fulfilling financial obligations.
In the latest concern, Eagle Hospitality managers issued an Aug. 14 statement to investors noting that Taylor Woods, one of the heads of Urban Commons, improperly applied for and received a loan under a federal program meant to help small businesses retain employees during the coronavirus pandemic.
Woods applied for the loan even though he was not authorized to do so and had been removed as a Queen Mary lessor, according to the statement. The loan was approved for between $2 million to $5 million, but that money has not been accounted for, the statement said.
Eagle Hospitality said trustee managers were never notified of the loan.
“…neither the Special Committee nor (trustee managers) was aware of, nor did any of them authorize, the QM PPP Application. Furthermore, no portion of the QM PPP Loan proceeds from the (lender) was received by the QM Master Lessor,” the statement said.
After discovering the issue, Eagle Hospitality managers sent a demand letter to Woods on July 9 requesting more information. Managers received a response on July 15 stating that the loan was the “result of errors in certain payroll records” and that the issue would be resolved within two weeks. However, Eagle Hospitality in its Aug. 14 statement to investors said the issue still had not been resolved.
Eagle Hospitality said it also contacted the federal Small Business Association’s task force for investigating improper PPP loans. An SBA spokesperson, Miryam Barajas, on Wednesday said the agency does not comment on individual loans.
Federal records show that at least two limited liability corporations connected to the Queen Mary through Urban Commons applied for federal small business loans.
On May 4, a $2 million to $5 million loan was approved for Urban Commons Queensway LLC to retain 410 jobs.
Another $2 million to $5 million loan was approved on May 3 for EHT QMLB, LLC to retain 500 jobs.
Urban Commons has a web of limited liability corporations for its many properties. For the Queen Mary, the company previously held the Urban Commons Queensway entity, but it switched to EHT QMLB in May 2019 as part of a restructuring.
The company in a statement this week said it made a clerical error when it applied for a PPP loan under the older Urban Commons Queensway entity, which is not eligible for a federal loan because it is foreign owned. The current EHT QMLB is a U.S.-based entity.
Urban Commons in a statement said the issue is being resolved and that the lender is working with the SBA to realign the loan to the correct entity. The company declined to say where the loan money currently is.
“An administrative error was made, whereby a Paycheck Protection Program (PPP) loan application was submitted in the incorrect entity name,” the company said. “However, steps were proactively taken to address the issue.”
The Queen Mary and its hotel have been closed since early May due to the COVID-19 pandemic, with no indication of when it will reopen. Urban Commons said some Queen Mary employees have been furloughed while others have been laid off.
The Queen Mary Hotel/Urban Commons Queensway sent notices to lay off 480 people on May 7, according to the California Development Department. The status of whether those layoffs were temporary or permanent is listed as “unknown at this time.” The Queen Mary Hotel alone sent notices for an additional 80 layoffs on the same date.
Like many in the hospitality industry, Urban Commons, which has a portfolio of more than a dozen hotels across the country, has faced major financial problems in the coronavirus pandemic. However, the company was showing signs of struggles before the pandemic and is currently being investigated by Long Beach’s city auditor.
Among the concerns for the audit, the city in 2016 issued $23 million in bonds for emergency repairs for the aging ship, but funds ran out and some projects were sidelined as many critical repairs ran over budget. City Auditor Laura Doud has said she is looking into how that money was spent.
On March 19, Eagle Hospitality Trust halted trading on the Singapore Stock exchange following a notice of default on a $341 million loan to Urban Commons from Bank of America. Trading remains closed.
Editors note: This article has been updated to attribute statements to Urban Commons. The article was also updated to note that some Queen Mary employees were laid off rather than furloughed.