City auditor to conduct review of Queen Mary operator’s finances
The Long Beach auditor will conduct a review of the city’s lease agreement with the company that operates the Queen Mary to ensure that the city has “received all revenues owed,” according to a statement on Tuesday.
The announcement comes a few weeks after the Post reported that Urban Commons, which has operated the ship since 2016, was in danger of defaulting on its lease with the city after failing to meet its obligations to maintain and repair the historic vessel.
Long Beach Auditor Laura Doud said in a statement Tuesday that she will seek a more detailed analysis of Urban Commons’ recently released 2017 and 2018 financial statements, which are required under the lease terms even though it is a private company.
The move also comes in light of the company’s public offering on the Singapore Stock Exchange last spring. The auditor will seek to reconcile the company’s audited financial statements from the last two years and information contained in the company’s prospectus to potential investors, which was done under the name of Eagle Hospitality Trust.
A forensic accounting firm will be enlisted to help in the review, Doud said.
“The iconic Queen Mary has for generations been a significant and meaningful part of our City’s history, but the ship has gone through some very challenging times,” she said in the statement.
Taylor Woods, principal and co-founder at Urban Commons, said in a statement Tuesday that the company has made significant capital investments into the repair and operation of the ship “and are excited about the recent advancements and enhancements to the financial picture we have created to protect the legacy and future of the Queen Mary.
“Urban Commons looks forward to working with the City on the recently announced audit, which is expected and normal, and to continuing with our successful partnership for many years to come.”
An outside engineer who has reviewed the ship’s condition for the last 25 years said in October that the ship’s condition was deteriorating to the point that it may be unsalvageable.
Urban Commons signed a 66-year lease to operate the city-owned ship in 2016. As part of the 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.
In October the city sent Urban Commons a letter stating that the Los Angeles-based company has not met its obligations to maintain and repair the historic ship. The company, according to the letter, could be in danger of defaulting on its lease agreement to run the ship if critical repairs are not done.
Some of the repairs that are needed include paint, repair of splintered wood, standing water in the bilges and removal of the ship’s life boats, among other issues.
The upcoming audit of the Queen Mary’s financials and lease compliance will be the sixth audit of the Queen Mary conducted by Doud, who is an elected official. Previous audits recommended improvements over asset management, capital improvements, internal controls and accounting, tenant contract compliance, and the city’s oversight of the lease agreement.
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