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EHT clarifies values of 3 hotels acquired from sponsor
EAGLE Hospitality Trust (EHT) on Wednesday said the original purchase prices for three assets which are part of the ASAP6 portfolio have not been disclosed and are not known to the Reit (real estate investment trust) manager.
It was responding to recent media reports - one by The Edge regarding the valuation of the assets which comprise the ASAP6 portfolio it acquired from its sponsor, and another by BT on its sponsor Urban Commons' links to EHT’s biggest investor.
In a regulatory filing, the stapled hospitality group clarified that the values of three hotel assets reported by The Edge reflect the "mortgage amounts at the time ASAP originally acquired certain of the referenced assets, and not the actual purchase prices".
The assets are Crowne Plaza Dallas, Renaissance Woodbridge and Doubletree by Hilton Salt Lake City, and are part of the ASAP6 portfolio consisting six hotels which were acquired by EHT from the sponsor on May 24, which is EHT's listing date.
EHT's manager said it does not think the valuation comparisons made are representative as they did not take into account a meaningful time lapse of about 2.5 years on average since ASAP originally acquired the assets, and the significant capital invested and reserved since ASAP acquired the assets. It added that the IPO (initial public offering) prospectus had disclosed about US$22.4 million was invested and reserved since the original acquisitions.
"In this situation, the alleged purchase prices would not reflect the equity components of these transactions, thereby underestimating ASAP’s original purchase prices," it said.
EHT added that the ASAP6 portfolio was valued by two independent valuers in connection with the IPO, and that each of the six assets under the ASAP6 portfolio were injected into Eagle Hospitality Real Estate Investment Trust (EH-Reit) at a discount of at least 12 per cent to their adopted valuation Dec 31, 2018.
EHT is a stapled group comprising EH-Reit and Eagle Hospitality Business Trust.
Regarding its leasehold interest in the Queen Mary, EHT clarified that it does not lease the ship from Urban Commons, but rather EH-Reit sub-leases the Queen Mary to Urban Commons with the "express consent of the City of Long Beach".
In the event of a default by Urban Commons to make required repairs at the Queen Mary, EH-Reit reserves the right to cure the default and make the repairs itself at Urban Common’s expense and/or terminate the existing master lease and enter a new master lease with a third party, it added.
EHT also clarified that the three men who bought a combined 33.4 per cent stake in EHT through placement during its IPO - namely Frank, Norbert and Jerome Yuan were introduced by the sponsor to the placement agents.
The Yuans run ASAP Holdings, the family office which inked a deal to sell hotels under the ASAP6 portfolio to the sponsor two months before the IPO prospectus was published.
EHT stapled securities were trading 4.6 per cent or two US cents higher at US$0.46 on Wednesday as at 9.18am after the announcement.