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EHT says 'premature' to assess sponsor's estimate of Queen Mary repair costs

EAGLE Hospitality Trust (EHT) on Sunday night said it is still "premature" to appoint its own expert to separately evaluate the costs of the maintenance of the Queen Mary floating hotel at this stage.

This comes as its sponsor Urban Commons (UC) had estimated that the improvement and repair works at the retired cruise ship will cost US$5-7 million, according to UC’s proposal to the City of Long Beach in California.

Last week, a memo by the City, where the Queen Mary is docked, stated that the City is engaging a third-party marine engineering firm to review UC’s proposal to address critical repairs to the ageing vessel, including the removal of its corroded lifeboats.

Separately, the City has also commissioned a local engineering firm to conduct a peer review of the monthly inspection reports of the ship by independent engineer Edward Pribonic. The peer review is expected to be completed in November.

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EHT said on Sunday that its board will “consider all options” – including appointing its own professional valuer to assess UC’s US$5-7 million estimate – depending on the outcome of the City’s review of UC’s proposal.

EHT was responding to the Singapore Exchange’s (SGX) queries sent on Friday regarding The Business Timesarticle about the peer review.

EHT added that its manager is “closely monitoring” the situation at the Queen Mary and is also in ongoing and regular contact with UC regarding the work being done at the ship.

The City leases the Queen Mary to UC. The peer review was commissioned after Mr Pribonic wrote in August that the Queen Mary’s condition was getting worse as a result of neglect, and that it might soon be “unsalvageable”.

On Sunday, EHT also stated that the forecast contribution of Queen Mary to its net property income (NPI) is about US$8.5 million, comprising 16.4 per cent of the NPI for the period from May 1 to Dec 31, 2019. The projected contribution of the ship is US$12.4 million, comprising 15.9 per cent of EHT’s NPI for fiscal year 2020 ending Dec 31, 2020.

In terms of EHT’s portfolio, EHT disclosed that prior to its initial public offering (IPO), none of ASAP or its directors or equity holders had any financial interest in or were involved in the operation of EHT’s assets in the past other than the ASAP6 properties. However, ASAP did introduce some of the acquisition opportunities with respect to EHT’s portfolio of assets to UC.

Asset management firm ASAP had sold the ASAP6 properties – comprising six hotels – to UC ahead of the IPO in order to gain transaction certainty, EHT said last week in response to an earlier set of queries by the SGX.

Stapled securities of EHT were trading up 0.5 US cent or 1 per cent at 46 US cents as at 9.19am on Monday.