In the wake of damaging reports on the Queen Mary’s condition, a real estate investment trust sponsored by ship operator Urban Commons halted trading of its shares on Thursday as it tried to assure wary investors that the vessel remains safe and structurally sound.
Urban Commons, a Los Angeles-based real estate investment firm, signed a lease to run the Long Beach-owned Queen Mary in 2016 and has plans to develop the surrounding 65 acres into a $250 million entertainment destination known as Queen Mary Island.
The company in May formed Eagle Hospitality Trust and went public on the Singapore Stock Exchange with the goal of generating up to $566 million for its portfolio of 13 hotel properties it owns or manages, including the 1930s-era ship.
But Eagle Hospitality has since been on shaky ground, with its shares dropping more than 17 percent from its initial public offering price of 78 cents. Its stapled securities ended at 65 cents on Wednesday, following a critical report from a Singapore news outlet detailing the Queen Mary’s conditions.
The report was based on a series of recent Post articles that included highly critical inspection reports for the ship and a letter from the City of Long Beach to Urban Commons warning the company it was in danger of defaulting on its lease agreement if urgent repairs are not done.
An August draft report from city-hired inspector Ed Pribonic said the ship could soon be “unsalvageable” without an immediate infusion of manpower and money.
On Thursday, Eagle Hospitality requested a trading halt and issued an announcement assuring investors that the ship “remains safe and structurally sound” and that Urban Commons is “not in default on The Queen Mary ground lease.”
The trust said Urban Commons has worked alongside the city for the past three years and has taken initiatives to address and clarify concerns outlined in the city’s letter. The trust noted that Urban Commons has invested $23 million into the Queen Mary and has completed “major life safety and structural projects, including the repair of the Fire and Life Safety System ship-wide, replacement of expansion joints, and additional major structural repairs and renovations.”
“We have a great partnership with the City of Long Beach and have worked closely to establish a perpetual funding mechanism, which includes the Historical Preservation Capital Improvement Plan fund that will help provide continued resources into the future to ensure the Queen Mary’s viability,” Urban Commons Principal Taylor Woods said in the announcement.
As part of the ship’s lease agreement, the city issued $23 million in bonds to fix some of the most critical repairs listed in a 2015 marine survey. Urban Commons is on the hook to fund the remaining repairs. The marine survey projected costs of up to $289 million for urgent repairs over the next several years, a figure Urban Commons disputes.
But many of the initial repairs went significantly over budget and the $23 million was spent before other critical projects could be addressed.
By the end of this month, Urban Commons is expected to provide the city with an updated plan to address the critical repairs and deficiencies.
Long Beach Economic Development Director John Keisler in an email on Thursday said Urban Commons has said it will meet the city’s requested timeline.
“Over the past few days, Urban Commons staff have been actively communicating with the city to clarify and confirm what level of detail is needed to comply with the city’s request,” he said.
Keisler said the city has been in touch with Urban Commons regarding the temporary trading halt.
“Our understanding that this is a financial decision related to investor confidence and does not alter their commitment to addressing concerns documented in our recent letter; nor does not alter Urban Commons‘ commitment to fulfilling the term of the lease,” he said.