+ A New Chapter For Queen Mary: City Hall's Operator Urban Commons Seeks Chapter 11 BK Protection
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A New Chapter For Queen Mary: City Hall's Operator Urban Commons Seeks Chapter 11 BK Protection

Did Council's two Dec. closed sessions agendized to discuss "lease amendment" violate Brown (open meetings) Act?



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(Jan. 20, 2021, 5:15 a.m.) -- On Jan. 18, Urban Commons, Queensway, LLC along with several Urban Commons related entities sought Chapter 11 bankruptcy protection in Delaware Bankruptcy court .



Prior to the Jan. 18 action, the LB City Council held two Dec. 2020 closed sessions (closed to the public and the press) "regarding a conference with the City's real property negotiator [City Mgr. Tom Modica] regarding "1126 Queen's Highway, commonly known as the Queen Mary."

On December 15, the Council held a closed session (under CA Govt Code 54956) regarding "lease amendment terms" as part of a regularly scheduled Council meeting, but on Dec. 28, 2019, the Council held a specially scheduled meetion to deal with the same agendized topic. On both occasions, the City Attorney's office said no reportable action had taken place in the closed session..They identified the negotiating parties as the City of LB and Urban Commons Queensway, LLC.

[LBREPORT.com is exploring whether the Council agendized titles were a pretext to discuss the forthcoming bankruptcy and/or other QM related items outdside of public view. if so, they violated the Brown (open meetings) Act which limits closed session discussion to the supposed lease amendment, and doesn't allow other QM matters.]

LBREPORT.com also noted on our Jan. 13 front page the complete omission of the Queen Mary from Mayor Garcia's Jan. 2021 "State of the City" address (after Garcia made the ship the climactic item in his 2020 "State of the City: message.)

[Scroll down for further.]







Amnesia File

November 1, 2016: The City Council votes 6-1 (motion by Pearce, seconded by Andrews, Price dissenting, Richardson and Gonzalez on SCAG trip to China) to approve a lease with Urban Commons that included spending up to $23 million to perform a list of what the City acknowledged were urgently needed Queen Mary ship repairs. That sum is now entirely depleted without performing some of the repair items, as the City says the cost of dealing with the ship's fire protection system cost millions more than expected.

During Council discussion, Interim Director of Economic and Property Development, Kathryn McDermott, disclosed that the Queen Mary somehow requires over $200 million in repairs, and indicated this was known as a result of a survey on the ship' condition conducted by its previous lessee (Garrison) and its current lessee (Urban Commons). Additional details were described in a city management agendizing memo here.

Auditor Doud said she has a duty to express her concerns, said she'd like to examine the long term plans for the QM and voiced concern over the size of $200+ million in QM repairs that staff now contends are needed. The Council declined to agree to a request by Councilwoman Price to give City Auditor Laura Doud 14 days (Price initially sought 30 days) to review the proposed transaction.

No Councilmember(s) asked publicly how that magnitude of repairs was allowed to accumulate or who (by name) was responsible for letting this occur. To date, those details haven't been publicly addressed by LB's Mayor or the city's policy-setting City Council.
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Nov. 4, 2019: City management sends LB's Mayor and City Councilmembers a memo indicating that the city's QM ship/adjacent land developer lessee, Urban Commons, had responded on Oct. 22 to the City's request for plans to address chronic vessel maintenance and repair issues and provide certain financial documents. The memo the City's Director of Economic Development, John Keisler, to Assistant City Mgr. Tom Modica for transmittal to the Mayor/Council provides a generally upbeat response to the lessee's plan. It idicates that certain maintenance items (painting. water intrusion, rust inhibitors) are being funded right now by Urban Commons.

However city management's management memo also attaches a document -- Attachment B -- signed by Urban Commons Queensway LLC's Taylor Woods which indicates that the estimated cost of certain needed repairs is approximately $5M to $7M. In that document, Mr. Woods states that "Urban Commons remains dedicated to its partnership with the City of Long Beach and to the long term preservation, maintenance and development of the historic ship on behalf of the residents of and visitors to the city" while recognizing "that historic preservation will be costly and that it will require certain creative partnerships to develop the funding to make needed repairs."

City management's memo to the Mayor/Council leaves uclear exactly what, if any, "creative partnerships to develop the funding" to make the needed repairs city management may now be discussing with Urban Commons (which at some point could presumably come to the City Council for approval.).

City management's memo indicates that Urban Commons has contracted for certain exterior paint and joint repair work, developed a "supplemental maintenance plan" to "remove standing water, investigate and repair water intrusion sources, and reapply rust inhibitor where needed" and indicates that Urban Commons will fund these items without tapping City-funded "Historical Preservation Capital Improvement Plan [roughly $23 million, now depleted, from a debt bond plus reserves], part of the transaction to which Council agreed in November 2016 when it authorized (Price dissenting) entering into a 66-year year-lease with Urban Commons to operate the ship and develop its adjoining land into "Queen Mary Island."

City management's memo says Urban Commons has a "bid" of $4.8 million from an independent contractor to perform certain additional critical side-shell repair work and life boat removal. City management's memo says the City will work with an independent engineering firm to confirm the scope of work, timing and cost and said the "City is confident that Urban Commons now has a plan in place to resolve the remaining structural issues identified in the Marine Survey..."

In an attachment to city management's memo, Taylor Woods of Urban Commons states that his firm "will work with the City to explore using funds based on the ongoing income sources created at the outset of our lease and that the "estimated cost of all the items above is approximately $5M to $7M based on the scope of work provided" and adds:

"Although the organization has learned a great deal about the challenges associated with maintaining a historic asset such as Queen Mary, Urban Commons remains dedicated to its partnership with the City of Long Beach and to the long term preservation, maintenance and development of the historic ship on behalf of the residents of and visitors to the city. We recognize that historic preservation will be costly and that it will require certain creative partnerships to develop the funding to make needed repairs."

Urban Commons also submitted to city management a Feb. 2018 report for the ship's hull and tank top which it says "continues to support the fact that the ship is structurally safe and in no danger of being unsalvageable."

City management also tells the Mayor/Council that it has hired an independent firm to conduct a peer-review of inspection reports provided (for roughly twenty years) by a city-retained engineer [whose monthly reports have grown increasingly critical of the ship's maintenance and condition.] The memo indicates the "peer review" is expected to be completed in mid-November.

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December 2019: :Long Beach city management terminates the City's contractual relationship with an independent engineer (tasked for over 20 years to perform monthly Queen Mary inspections) who'd become increasingly critical publicly of the ship's maintenance and the City's record in addressing maintenance issues.

January 2020: Mayor Robert Garcia uses his "State of the City" message to declare the Queen Mary was part of LB's past and present, said the ship "isn't going anywhere" and references future plans by lessee Urban Commons for development of "Queen Mary island."

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Jan.15, 2020: Urban Commons issues a statement regarding the future of the Queen Mary.

[Urban Commons Jan. 15, 2020 release text]

URBAN COMMONS ANNOUNCES DEVELOPMENT OF 30-YEAR QUEEN MARY HISTORIC PRESERVATION BLUEPRINT

  • The evolving long-term plan will map out preservation projects, with peer-led annual inspections and ‘close-up’ surveys every five years
  • Partnership formed between Queen Mary’s Historic Resources Advisor and industry experts
  • Blueprint will utilize past surveys and reports, to inform deliverable and measurable plan

    LONG BEACH, CA, January 15, 2020 – Urban Commons, a Los Angeles-based real estate investment and development firm and current leaseholder of the Queen Mary, will reveal a 30-year plan to preserve and improve the historic ship docked in Long Beach.

    The first-of-its-kind plan will outline major renovations with their associated costs, to safeguard the ship’s entire framework as well as maintaining its iconic image.

    "Urban Commons is pleased to announce the next step in the ongoing preservation efforts aboard the Queen Mary," said John Thomas, Historic Resources Advisor at The Queen Mary. "We are working with a Marine Surveyor and Structural Engineer to create a plan that covers aesthetic, structural and engineering issues -- not only covering the state of these areas today, but anticipating decades of continuous work with associated capital investment.

    "Utilizing information pertinent to the ship’s preservation from Environmental and Engineering Reports, a 2015 Marine Survey and local Marine Studies, Urban Commons has retained the services of a A.M. Marine Surveys and John A. Martin Associates, Inc. to perform a peer review of these previous studies and develop a 30-year implementation plan. The Historic Preservation Blueprint will determine and prioritize preservation projects with their related costs, address any further studies and establish a comprehensive maintenance and monitoring plan for the historic Queen Mary."

    Annual inspections are part of the 30-year plan, as well as ‘close-up surveys’ every five years. These reviews ensure that not only is the plan being implemented, but updating and re-prioritizing the plan if needed. Then, every ten years, an additional decade will be added to the plan, using experience as well as ongoing work and inspections from the years previous.

    Long Beach Mayor Robert Garcia said in his State of the City speech Tuesday, January 14, that "They [Urban Commons] will be developing a Historic Preservation Blueprint, accessible and transparent to the public, that will map out the preservation projects and critical repairs."

    "During her life, the Queen Mary has transported royalty and refugees, soldiers and celebrities, and now she lives in Long Beach as a historic international treasure," said Howard Wu, Principle at Urban Commons. "Akin to the ship herself, while we need a robust and realistic blueprint, this plan must be flexible with the ability to evolve and pivot as needed.

    "We have learned not only the amount of love and care the ship requires daily, but also completed crucial groundwork ensuring staff and guest safety. There have been many reports and surveys addressing the state of the Queen Mary, and while they may identify preservation projects of today, what about tomorrow, in five or ten years or when the historic ship will provide the iconic backdrop to the 2028 Olympics on the Long Beach waterfront? Maintenance and preservation on our iconic landmark is an ongoing investment, and this blueprint will outline exactly that.

    "For the first time, Urban Commons has established additional income sources for the Queen Mary, which feed into a reserve fund to ensure the longevity of the ship. By utilizing the 40 surrounding acres, additional revenue will continue to be generated and we're excited to share our updated plans for the area around the Queen Mary later this year."

  • Oct. 5, 2020: The City of Long Beach issues an official statement regarding the Queen Mary and the arrest of current and former Eagle Hospital Trust (EHT) manager/directors in Singapore.

    The City has recently seen news reports from Singapore about the arrest of several members of the Board of Directors of Eagle Hospitality Trust (EHT), the Real Estate Investment Trust (REIT) which owns an interest in Urban Commons Queensway, LLC, the lessee under the Queen Mary Master Lease.

    The City of Long Beach considers this announcement very troubling and is taking the matter seriously given that EHT is involved with the long-term management, maintenance, and security of the historic Queen Mary and adjacent property via the 65-year Master Lease Agreement (Master Lease), executed in 2016. The City is reviewing the reported allegations and is exploring legal options to ensure the Queen Mary and adjacent property is protected. Due to the recency of the reported events, this is only the beginning of the review process and City staff will report back to the City Council and the community as information becomes available.

    Proactive oversight of the Queen Mary is a priority of the City. The City acted on July 1, 2020 to place EHT/Urban Commons in default of their lease for failure to provide audited financial reports, and they currently remain in default. The lender has 120 days to cure the default, which will expire on November 11, 2020. Additionally, in an effort to promote accountability and streamline management of the Master Lease, FTI Consulting—the management company appointed by the EHT Board of Directors to oversee restructuring of the EHT portfolio of real estate assets including the Queen Mary—recently terminated its operating sublease agreement with former operator EHT QMLB, LLC. This was the result of several failures by the former operator to pay Transient Occupancy Taxes (TOT), fixed rent, and insurance premiums to the City, among other performance issues,which required FTI/EHT to step-in to fulfill the obligations of the former operator.

    City management maintains regular contact with FTI Consulting. Leadership and legal counsel from FTI Consulting has informed the City that recent events will not have any impact on the Master Lease for the Queen Mary and thatSan Clemente-based Evolution Hospitality will continue to manage day-to-day operations, maintenance, and security of Queen Mary and adjacent property as it has since 2011.


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