Urban Commons issues notice of breaches to Eagle Hospitality Trust

URBAN Commons (UC), the sponsor of beleaguered Eagle Hospitality Trust (EHT), on Wednesday announced that it has sent a breach notice to EHT.

It said that funds it had injected into EHT are outstanding and due for repayment.

In a media release, UC claimed it had provided EHT with "millions of dollars in excess of the audited hotel income" to subsidise rent and other reserves paid by the hotels under the master lease agreements.

It also claimed it has a plan to provide financial support to EHT, but has been unable to implement this plan because of a lack of cooperation from EHT's trustee, the special committee negotiating with lenders, and EHT's third party advisors and consultants.

FTI Consulting, as chief restructuring officers of EHT's managers, had commenced a forensic accounting investigation into UC and its master lessees on June 29.

The scope of the forensic accounting investigation includes, among other things, reviewing and analysing the fluctuations of the financial statements of the master lessees, which are wholly-owned by Urban Commons.

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UC said it has not benefited financially since the Reit's initial public offering (IPO).

It also complained that EHT is now spending money on retainer fees for professional consultants hired to help EHT deal with its difficulties.

Howard Wu and Taylor Woods, who are co-founders and principals at UC, said in the release that the comments of these professional consultants "may have led EHT into taking unnecessary steps that appear to have not only consumed precious time during a global pandemic, but also millions of EHT unitholders' dollars".

Mr Wu and Mr Woods had resigned from EHT's manager on May 26, after the EHT managers had uncovered interested-person transactions that were "not on usual commercial terms" and were therefore "prejudicial" to the interests of EHT and its minority stapled securityholders.

Mr Wu and Mr Woods said: "Instead of focusing on executing plans to ensure that the EHT portfolio survives through this pandemic, the advisors announced that they are conducting a forensic accounting investigation on the master lessee and the sponsor, intentionally giving the market the impression that there was wrongdoing by the sponsor and the master lessee.

"This has not only caused anxiety and concern to unitholders; it has also generated mistrust among unitholders about us and caused huge damage to our reputation. When asked to clarify the statement, they have simply ignored us."

The Business Times has reached out to EHT for comment.