Statement by City of LB re Its Queen Mary Lessee

+ Statement by City of LB re Its Queen Mary Lessee

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Includes LBREPORT.com "Amnesia File" On Salient City Actions

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(Oct. 6, 2020) -- In response to an inquiry by LBREPORT.com following complex developments reported by an Asia-focused news outlet, the City of Long Beach provided a statement near the end of the Oct. 5 business day. We pubnlish it in full.

LBREPORT.com precedes the City statement with salient items as context ("Amnesia File"):

On November 1, 2016, the City Council voted 6-1 (motion by Pearce, seconded by Andrews, Price dissenting, Richarddson 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 a number of the repair items, as the City says the cost of dealing with the ship's fire protection system cost millions more than expected.

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. .

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 and 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.

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. (City Auditor Doud isn't part of city management but had been in office since 2006, a period during which some quantum of ship repairs had been allowed to accumulate.)

In December 2019, the City of LB terminated its contractual relationship with an independent engineer (tasked for over 20 years to perform monthly Queen Mary inspections) who'd become publicly critical of the ship's maintenance and the City's record in addressing issues he'd raised..

In January 2020, Mayor Robert Garcia used 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 referenced future plans by lessee Urban Commons for development of "Queen Mary island."

Below is the City of LB's Oct. 5, response to recent complex developments.

[Scroll down for further.]

Oct. 5, 2020
Official City of Long Beach Statement Regarding the Queen Mary and the Arrest of Current and Former Eagle Hospitality Trust (EHT) Managers and 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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Support really independent news in Long Beach. No one in LBREPORT.com's ownership, reporting or editorial decision-making has ties to development interests, advocacy groups or other special interests; or is seeking or receiving benefits of City development-related decisions; or holds a City Hall appointive position; or has contributed sums to political campaigns for Long Beach incumbents or challengers. LBREPORT.com isn't part of an out of town corporate cluster and no one its ownership, editorial or publishing decisionmaking has been part of the governing board of any City government body or other entity on whose policies we report. LBREPORT.com is reader and advertiser supported. You can help keep really independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.

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