my followers will notice that i often like to buy stocks that have fallen sharply and continues to become cheaper

will i buy this $Eagle HTrust USD(LIW.SI) ? nope

i will only buy high quality companies which has a temporary weakness, like a slow down in industry or economy that will turn around after a year... the sell down can be an opportunity to buy cheap
but this eagle is low quality and shady, both short term and long term fundamentals are poor and management is doubtful... no matter how cheap i also will not put money into this kinda company

bad companies will only continue to drop further untill no end, example hph, sph, noble, hyflux

good companies facing temporary set backs can recover, example thaibev, sheng siong, keppel corp, banks

warren buffet once said that he would rather pay a fair price for a good company than a good price for a fair company

if u want to have long term sucess as an investor, u should look seek to acquire good business that you are willingly to hold for many years in your portfolio

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Snorlax

Why those aiming EHT when HK reits are trading so cheaply in term of quality assets.

MasterLeong

Sean: [00:19:24] How big is your guys asset portfolio now?

Jerome: [00:19:27] So we just actually did a transaction where we sold six of our hotels to a public REI in Singapore for 250 million for the six hotels. I&rsquo ve been gradually selling the hotels since 2017 just because I have a feeling timing is right and I just don&rsquo t want to hold onto too much risk as we get later on in the cycle. But anyway, so we just sold six. We only have three hotels left in the portfolio which you know, the three hotels are about 150 million, put it like that.

leewe

Reply to @MasterLeong : 20cent will come eventually. Its just a matter of time. Yes hospitality reits r very cyclical and volatile. Thats y i never like to keep them in my portfolio

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MasterLeong

Below is the full interview of Jerome Yuan in USA,
he seems to be smart, knowlegdable on legal and financial matter,
seems that he will act above board and comply with law fully
there is nothing regulator can catch him

======================================================================================

So the best way, I mean if you&rsquo re really interested, is just study deals and deal flow and whatever comes to your desk, whatever questions you might have, you got to keep studying and make sure it&rsquo s something that&rsquo s right for you.

Hey everyone, and welcome to another episode of the Everything Real Estate Investing Show with Sean Pan. Today, we have Jerome Yuan. Jerome&rsquo s a hotel syndicator and at one point, his portfolio consisted of 1 billion dollars worth of hotels. He&rsquo ll be sharing his story of how he got into the hotel space and how he was able to leverage partnerships to do larger deals. If you&rsquo re interested in understanding how investing in hotels work, you need to listen to this episode. If you enjoyed this episode, subscribe to the show and leave a review. We release episodes every Wednesday and Sunday and release the show notes on our site everythingREI.com. Enjoy!

Sean: [00:01:07] Go ahead and introduce yourself and let us know who you are and how you got into real estate investing.

Jerome: [00:01:11] My name is Jerome Yuan. Worked at a family office basically with my father and my uncle and we&rsquo ve been doing real estate investing mostly in the commercial real estate and specifically in the hotel space for over 10 to 12 years now. The way we started was just backing into this sector back in the financial crisis 2008-2009. My family figured it was a good time to jump back in into real estate and we looked around different asset classes: office, retail, apartments, and hotels mainly, and found that there were a lot of opportunities in the hotel sector that we can take advantage of. And we kind of jumped on the opportunity once it presented itself whether through like bank foreclosure, bank notes or just distressed assets with working through with sellers. So the past, you know, 12 years have been a good run especially in the hotel sector because the cash flows have been great and we just been leveraging ourselves and our education to keep growing and doing more deals one by one.

Sean: [00:02:37] Did you guys have experience with real estate investing before all this?

Jerome: [00:02:40] Yeah, so minor experience. My father in the 80s and 90s did some development. Mostly condos, small units, like 6 to 8-unit condo developments and would sell it off. And then you know, we had some legacy type of real estate investments just in the family like a small apartment unit, like 15-unit apartment. And then some farmland up in Bakersfield that we just kind of leased out. You know, we didn&rsquo t have specific experience in the hotel sector so we kind of just learned as we went along.

Sean: [00:03:19] Hotels are such like an ambitious project, don&rsquo t you think? Like most people when they go into real estate investing they buy a single-family house or they flip a home.

Jerome: [00:03:28] We were fortunate enough to be able to kind of pool our money together with overseas investors. You know, just from networking and my family&rsquo s background. During that time a lot of money was coming in from China and Asia. You know, we would look at projects together. And so obviously at that time we didn&rsquo t have millions of dollars to kind of put down on a first project. So we kind of syndicated investment together with a partner where they put in about ninety percent of the capital and we put in ten percent. And you know, they needed some local knowledge to walk them through everything here. So we&rsquo re kind of fortunate in that way where we started with a big partner that wanted to do bigger deals.

Sean: [00:04:18] So this partner is overseas and have this a lot of capital they want to invest in something in the United States. You guys are like the boots on the ground and able to offer I guest operational expertise.

Jerome: [00:04:29] Right. Yeah, exactly. So yeah, they&rsquo re overseas. So what we did was we are the asset manager instead of like the property manager, where we do have a property manager at the hotel that we hire. It&rsquo s a third party and they&rsquo re approved by the brands and stuff but we act as asset manager. So almost like owner&rsquo s representative that&rsquo s here in the US but we negotiate with the property manager, their contract. We negotiate with a lender if there&rsquo s a loan. We negotiate with the franchise, the brand if there&rsquo s a brand like Marriott and Hilton. And we do mainly the big ticket items in terms of capex. So anything above, you know, like $5,000 at the hotel we got to approve anything and and pay for that capex coming from our office.

Sean: [00:05:21] How are you sourcing those deals when you&rsquo re just getting started?

Jerome: [00:05:23] It&rsquo s funny because in 2009&hellip so we actually closed our first hotel in 2010. In 2009 we&rsquo re just you know talking to brokers and and talking to banks. It took us like almost a whole year to source the first deal. But when we closed in 2010, it was like early 2010, at least in Southern California or Los Angeles, we were the only group that purchased a hotel that whole year that was over 30 million bucks. So we kind of made a name for ourselves in the industry and everyone, all the brokers and all the management companies came to us after that and said, &ldquo Who are these guys who wanted to buy a hotel?&rdquo you know, at this time when nobody else is buying. So we kind of built a reputation at that time so that people will come to us if they had any deals and because they knew we can close, we were interested in, and wanted to get deals done.

Sean: [00:06:32] And did you have your money partner already lined up or did you try to make the deals first?

Jerome: [00:06:37] Yes, we had the money partner lined up. He wanted to diversify out of China and wanted to put money to work here. And so we look together at all those different asset classes and just fell upon hotels. So yeah, we&rsquo re lucky in that way.

Sean: [00:06:55] So go ahead and tell me the quick story of how you found this first hotel deal. Where was it? And why did that particular deal looked attractive to you?

Jerome: [00:07:02] It was a broker deal through JLL but it was also a bank foreclosure. So they were working on behalf of the lender. And you know, you could take it over REO once you purchase. So it&rsquo s attractive because the bases are so low. It was a 450 keys Marriott in downtown Los Angeles. An old Marriott, which has since changed to an independent boutique hotel. But for 450 keys, you know, we could buy it for about 60 million, which was basically the amount of the note and with a little bit of discount. So that&rsquo s kind of where we came up with why this was attractive. It&rsquo s one it&rsquo s in downtown LA. We knew that downtown LA is transforming. It&rsquo s a good location. It&rsquo s all about location. And that you know, we were in at the cost of the lender so we felt like we were safe. Obviously as you know, non-performing asset that we had to inject a lot of capital, working capital as well as spend on the renovation, but we felt putting that money would be worth it after doing all the due diligence.

Sean: [00:08:27] So that&rsquo s pretty amazing and obviously back then there were some great discounts. How about now? What are you looking for now?

Jerome: [00:08:34] Yeah. Now it&rsquo s a lot different where you know, we&rsquo ve had a long kind of run in the cycle. Some of the hotels that we have across the country, you know, you can see kind of a&hellip I don&rsquo t want to say slow down but it&rsquo s you know, kind of slower growth in terms of one year after the other. So now just based on my experience and the lessons learned, because I&rsquo m located in California, I want to stay, if there is a hotel, I want to stay in California or major markets like New York, Manhattan or New Jersey or something like that markets that I know that I&rsquo ve been in and I can understand fairly easily. So I&rsquo m not going to go into a new market like Chicago or something like that even though I&rsquo m sure it&rsquo s a great market. It&rsquo s just I would have to start over and learn about the whole city and the market demand. And because you know because we&rsquo re such too late in the cycle, I want to make sure that our cap rate that we go in is reasonable for that market. So whether it&rsquo s a 8-cap, 7-cap, something like that, in California it&rsquo s something that&rsquo s more reasonable and that can support the distribution that I&rsquo m promising my investors.

Sean: [00:10:06] So, what are those? Like what is your buying criteria? And what are the distributions that you kind of tell your investors?

Jerome: [00:10:12] We&rsquo ve always kept it simple. So distributions are 8% preferred. And we keep the waterfall and the hurdle, you know, very simple and easy. 8% is kind of the hurdle. And then the buying criteria, if it&rsquo s in like urban downtown kind of LA, San Francisco, obviously cap rate can be lower. But within the suburbs then I got to get like 7.5 to 8% in terms of cap rate for the hotel.

Sean: You&rsquo re just talking about 7-8%. I know people who are buying hotels here in San Jose or San Francisco is 3-caps.

Jerome: Right, every investor has a different criteria. So it could be, you know, trophy property, or a distressed asset, or could be a huge value add play, you know, depending on where they&rsquo re buying it. So everybody&rsquo s different but at least for me and for where we are I got to have a seven or eight cap in this. I mean, especially in the hotel sector if you buy such a low cap rate, you could get in trouble, it could.

Sean: [00:11:27] Does a hotel require a lot more work than say a multi-family?

Jerome: [00:11:31] Right. I mean hotels are a completely different animal. Depending on the size of the hotel, there&rsquo s anywhere from 40 to 100 employees working at the hotel. And people check in and out on a daily basis. So definitely there&rsquo s couple long-term contracts but majority of the hotel is daily volume, daily transactions. So there&rsquo s a lot more operational activity that needs to go on a daily basis to watch over the hotel. I mean and that&rsquo s also the reason why there&rsquo s like kind of an arbitrage opportunity where operationally one management company, one owner to another owner, have different investment philosophies and different ways to manage. And so one owner can make a lot of money with the same hotel asset compared to another owner. And it just depends on how they want to manage and how they want to own the asset.

Sean: [00:12:30] So what do you think separates you and your company from let&rsquo s say another hotel operator?

Jerome: [00:12:34] We&rsquo re hands on. I&rsquo m not saying other people are not hands on. But we we watch the expense line items extremely carefully, just because the flow through. You know in apartments, if you have the net income compared to the gross revenues, it could be like 45-50% for net income from the gross revenue. But for the full service hotels that we&rsquo re looking at, it could be, you know, the name can be 20-25% of the gross income. And so every dollar that we save is a dollar to the bottom line. You know one thing that we do is definitely watch the cost extremely carefully. The other thing that we do is we watch the cost of the renovations extremely carefully. So we have a team kind of in-house project management that does all the construction and design and walk us through the renovation so that you know, we try not to go over budget. We try not to go past the deadlines in terms of construction. And so that kind of helps us save money in that sense. I mean, I think the business-wise it&rsquo s hard. It&rsquo s hard for us to generate revenue for the hotels just because all of our hotels are across the country, you know, we really rely on the property manager, the brands, the management team in-house at the property, to generate that revenue. But expense-wise we try to keep things in line.

Sean: [00:14:10] And what are some of the things that like a new operator might not know when they get into this business?

Jerome: [00:14:17] There&rsquo s a couple things I mean, you know. One the property manager that you pick is extremely important for the hotel. I mean, if you don&rsquo t even want to think about it, you can hire the franchise to manage the hotel. There&rsquo s plus or minus two everything. But first things first is the property manager is the most important thing and digging deeper is really the general manager at the hotel. That&rsquo s the most important person for you to communicate with. They&rsquo re like the CEO of your hotel and their day-to-day, talking to all the employees and the clients and customers and and the brands and stuff, so that person kind of steers the ship for the whole asset. And so you just got to be very careful. Make sure you pick the right person. They understand what you&rsquo re trying to do. They know the ins and out of how to manage the reservation system and you know follows all of your guidelines in terms of operations.

Sean: [00:15:24] Yeah, sounds like all the like similar problems that we have on the residential side, just on a much grander scale.

Jerome: [00:15:31] Right. I mean, yeah, it&rsquo s very similar, you know, like kind of like fixing and flipping houses is similar to fixing and flipping hotels. I&rsquo m just yeah just bigger dollar amount.

Sean: [00:15:41] So I remember when I first met you, you said you couldn&rsquo t make it to our event because you&rsquo re busy closing or I guess putting down a down payment on a large hotel in Texas. And I remember you said the down payment was like three million dollars, and just like my mind exploded because that&rsquo s the purchase price of a whole home here in Palo Alto. And you know, you guys own like the Queen Mary right? The hotels in Queen Mary. You own some hotels in Florida for like Nickelodeon. I was wondering you have so many projects. Do you have a favorite one?

Jerome: [00:16:14] Yeah. No, I don&rsquo t. You know one of the&hellip there&rsquo s a Double Tree in San Pedro and Los Angeles. That one probably is the closest, nearest, and dearest in my heart. It&rsquo s one of the earliest hotels that we purchased in like 2012. And we bought it like, you know, dirt cheap for like 12 million bucks at that time. And you know, I don&rsquo t think that we&rsquo ll ever going to sell that thing because our bases is so low. That one&rsquo s on the water or by the water, and we spent money to renovate it. So it&rsquo s nice, kind of resort like feeling and we&rsquo ve had a good time owning that for the past six to seven years. Yeah, there really isn&rsquo t a favorite. I try not to get too emotionally attached to any of the investments just because it&rsquo ll make it harder for us to sell and exit when the timing is right. But yeah, I think that one is my favorite.

Sean: [00:17:21] I totally understand because at the end it&rsquo s a numbers game. You don&rsquo t wanna get attached to anything. So I was wondering how do you fund your deals? Because I&rsquo m pretty sure it&rsquo s not just one guy funding you guys 90%. You got the 10% more. How are you guys trying fund?

Jerome: [00:17:38] We have different funding sources for our most recent projects. And mainly it&rsquo s friends and family. So friends and family would come in for the majority, I would say 65%, you know two-thirds of the investment money. And then to the 1/3, you know the last two or three projects we actually tried crowdsourcing. So we&rsquo ve done online crowdfunding and raise a couple million dollars just to try it out and see how it goes. But yeah, we have different sources and obviously the high net worth individuals that we work with in the past and some institutional partners that we&rsquo ve done in the past have come back as well. But mainly it&rsquo s just friends and family and this crowdfunding thing.

Sean: [00:18:28] So do you guys usually do 25% down and then get some large bank to cover the rest?

Jerome: [00:18:34] Yeah, we try to be more conservative because hotels are a lot more volatile type of commercial real estate. So we do at least 30 to 35% down and then we go out and get a loan for 60 or 65%.

Sean: [00:18:50] Okay, and then you said that you guys do like 8% pref. And on the back end, what does that waterfall structure usually look like?

Jerome: [00:18:58] 8% pref, then hundred percent total return to investors and that&rsquo s including our money that we put in and we put in anywhere from 10 to 25% of the capital stack also. And then hundred percent to the investors back and then it&rsquo s 70/30 split.

Sean: [00:19:17] 70/30&hellip to the investors right?

Jerome: [00:19:21] Right. 70 to the investors. 30 to us as the manager.

Sean: [00:19:24] How big is your guys asset portfolio now?

Jerome: [00:19:27] So we just actually did a transaction where we sold six of our hotels to a public REI in Singapore for 250 million for the six hotels. I&rsquo ve been gradually selling the hotels since 2017 just because I have a feeling timing is right and I just don&rsquo t want to hold onto too much risk as we get later on in the cycle. But anyway, so we just sold six. We only have three hotels left in the portfolio which you know, the three hotels are about 150 million, put it like that.

Sean: [00:20:11] I mean it&rsquo s still a lot.

Jerome: [00:20:14] It sounds like a lot. Real estate is funny. You know, it sounds like a lot, you can leverage. But really like, you know, sometimes you&rsquo re still cash-poor, you know you&rsquo re asset rich and cash poor.

Sean: [00:20:26] That&rsquo s how it is on all levels man, because when you buy seven houses but then you don&rsquo t have cash at some point.

Jerome: [00:20:31] Exactly like that.

Sean: [00:20:32] I mean, so you&rsquo re actually pretty big on the space. Do you have any opinions on, I don&rsquo t know, I guess like public raisers like Grant Cardone? He&rsquo s very big out there getting people to invest in his syndication deals.

Jerome: [00:20:43] You know I&rsquo m not too familiar with like a lot of the syndicators out there in terms of other asset classes I guess. For hotels like the only real groups that I deal with are like private equity funds and management companies and institutional guys, or I know that they&rsquo re still raising a lot of money and chasing a lot of the same deals. So, I mean, I think there&rsquo s a lot of deals out there. There&rsquo s a lot of money out there chasing fewer and fewer deals. And so I feel like that just drives up the price on the hotels. My belief in the syndication is like it&rsquo s more about the project. If the project makes sense, then you can raise money for it. I mean the sponsor obviously is important and the track record and you know, if they&rsquo re trustworthy and all that type of stuff, you know, that has to be given. But you got to look at the project. I don&rsquo t think I like the fund system kind of you invest in a fund and &ldquo let us take care of the investment&rdquo . I think that can be hit-or-miss and it&rsquo s harder to evaluate.

Sean: [00:22:04] I guess the problems that you have on the grand scale are the same as the problems we have on the small scale, but you guys profit way more because you&rsquo re doing much bigger deals. Would you recommend that people get into larger commercial properties or should they start with the small single family homes and duplexes first?

Jerome: [00:22:20] I think it&rsquo s really up to that individual investor and how they see things. I think a lot of people could get intimidated by doing bigger deals, you know. It&rsquo s all about about risk appetite and their investment knowledge. I would say start small like I personally started small too. Like we just kind of built 2 spec houses down here in LA to see how kind of construction and development works because we&rsquo re thinking about doing development now. And so, you know, we just built two houses from the ground up and sold them and just to see if it&rsquo s something we want to try on a bigger scale and building a hotel or any other commercial real estate.

Sean: [00:23:06] Do you have any advice for any new investors who want to get into the hotel space? How would you even try to get into your space?

Jerome: [00:23:14] Yeah, man. It&rsquo s been a while so I&rsquo m not exactly sure what&rsquo s the best way to get in. I think you just got to look at as many deals as you can. You know when we hire new employees for our company, I just keep sending them deals to study and they just gotta know review all the deals, review the demand drivers, and what are the value-add propositions, just to get yourself familiar with the asset class and location and everything. So the best way I mean if you&rsquo re really interested is just study deals and deal flow and whatever comes to your desk, whatever questions you might have, you got to keep studying and make sure it&rsquo s something that&rsquo s right for you.

Sean: [00:24:07] How large is the company now? How many employees you guys have?

Jerome: [00:24:09] Yeah, we don&rsquo t have&hellip I mean we&rsquo re still like a small company with 10 employees, because we were more of asset manager and we&rsquo re like try to keep it light in our own office. Yeah, we&rsquo re still a small company. I mean, it&rsquo s funny like we had a portfolio that was worth at one time close to a billion dollars, but we&rsquo re still like 10 to 15 employees in our office. That&rsquo s why I think asset value in real estate, it&rsquo s kind of strange a number to evaluate, but I guess there&rsquo s no other way that you can evaluate.

Sean: [00:24:50] Oh, yeah. I mean just keep it quiet like 70-member operations but all you do is flip homes, and they&rsquo re nowhere in the 1 million dollar asset value range. So like what are those daily tasks that you&rsquo re having your team do?

Jerome: [00:25:03] It&rsquo s all like whatever fire&rsquo s that come up at the hotel level that reach up reach our desk on a daily basis. So it could be, you know capex, then these get paid right away. It could be, you know any violation that popped up after the last fire life safety test from the local fire station. Or it could be just the brand is visiting the hotel and getting the hotel ready for QA, quality assurance inspection. Yeah, that&rsquo s like 20%-30% of the day and the other 30% is like taking care of asset level like lender questions, investor questions, brand correspondence. And then the last you know 30-40% is just spending time on finding new deals, doing underwriting, and reporting to current investors and general office type work here in the headquarter.

Sean: [00:26:12] And for finding new deals, are you guys doing more broker outreach or since you guys are such a big name that you&rsquo re actually getting all the deals to your desks now?

Jerome: [00:26:19] I really believe in building the broker network. So we always try to do more broker outreach. They&rsquo re very important to the deal flow because we need deals. They&rsquo re one of the first people to kind of hear deals. I have a team here that reaches out to them, talk to them. I mean we do get emails from email blasts from all the big brokerage houses. But yeah, we reach out and then we reach out to like that the management companies, third-party managers that manage with tells for other owners. They get first-hand information of other owners who are trying to sell. I really believe in trying to build up that network because it&rsquo s important especially in real estate, you know, your reputation is very important.

Sean: [00:27:04] Yep, absolutely. And staying top of mind is very important as well. Now that you have so much experience and you know kind of know more what you&rsquo re doing now, if you can go back in time, say 20 years from now, what kind of advice would you give yourself?

Jerome: [00:27:18] That&rsquo s a good question. 20 years going back in time, I would just tell myself to kind of focus more time on studying different real estate asset classes and trying to make sure I understand each asset class in greater detail. Just because now that I do understand hotels and this asset class and I&rsquo ve been exiting out of hotels, I do want to kind of expand and go into different asset classes. But I&rsquo m just kind of like starting over now and doing all due diligence on a whole bunch of stuff.

Sean: [00:28:00] Yeah, it&rsquo s fun to jump asset classes, but also very scary because like you said it&rsquo s like starting all over. So how can people get in contact with you?

Jerome: [00:28:09] Our company website is AsapHoldings.com. That has all of our contact information. I get emails on a daily basis so feel free to email me or call the office number on there. That goes directly to me.

Sean: [00:28:28] Awesome. Well Jerome, thank you so much for your time today and telling us everything that we need to know about hotels.

Jerome: [00:28:34] Thank you so much for inviting me.

Sean: [00:28:37] Take care!

ljunyuan

Reply to @MasterLeong : Thanks for the share bro! :)

Alchemist

Reply to @MasterLeong : I think the hotel have been overvalued enormously.

makeascene

Saw this in a private group. Not i say one, dont target me!

Today 11/5, 2 days later, it has sunk to 44 US cents. The other major seller is another Chinese Qian JianRong who has sold off 18.8mil shares.

Listed in May 2019 and just 6 months after IPO, the REIT is 44% off it's launching price. The 3 major shareholders with different company names are from the same family. The 6 properties were sold into EHT at such a hugh profit and their IPO holding is 34%.

___fucean___

thanks for sharing.

TheMAOZD

I own eagle Htrust but appreciate your opinions, it is only with differing views can we avoid groupthink

View More Comments (9)

Recommended & Related Posts

Investors have been fooled! $Eagle HTrust USD(LIW.SI)

https://www.theedgesingapore.com/capital/r...

I strongly believe they are not the only trust/reit doing such tricks, as the hot wave of trust/reits continues to keeps listing on SGX... investors do near zero due diligence and throw their money at all new reits as they are just so hungry for yield

so basically the assets are pass from one hand to another hand and finally to investors who subscribed for the shares via IPO, over the course the valuations gets marked up higher and higher so the first hand and second hand already made significant gains/profits...

like the music chair game, retail investors are the last one buying into these lousy assets at marked up/high valuations

please refer to article below by the edge

my personal view that this will definitely not be the only case, in the next 1-2 years to come as rates are held firm and reits get pressured, more worms will appear

Closer look at EHT's portfolio following Nov 2 replies to SGX
The Edge Singapore 3/11/2019, 11:09am

SINGAPORE (Nov 3): Since August, Claydon Hill Investments and Compass Cove Assets have been selling their stakes in Eagle Hospitality Trust. On Nov 2, EHT’s manager announced that Claydon Hill Investments subscribed to 141.44 million units at IPO, Compass Cove Assets subscribed to 120 million units and Bounty Green Assets 28.3 million units. As at Nov 2, Compass Hill has sold its stake down to 94.2 million units, and Claydon Hill Investments’ stake is down to 130.18 million units.

According to EHT’s announcement, the beneficial owners of Claydon Hill, Compass Cove and Bounty Green have a family relationship. Based on reports in the US press, Claydon Hill and Compass Cove invested in hotels on behalf of Chinese clients. They are also the managers/part owners of ASAP International Holdings whose unit Third Party ASAP6 Portfolio Vendors divested six hotels into EHT for the IPO process.

These hotels are: Sheraton Denver Tech Center, Crowne Plaza Dallas Near Galleria-Addison, Hilton Houston Galleria Area, Hilton Atlanta Northeast, Renaissance Woodbridge and Doubletree by Hilton Salt Lake City.

Crowne Plaza Dallas was purchased by ASAP for US$27.6 million ($37.4 million) and sold the hotel into EHT for US$50.7 million. Its adopted valuation in the REIT is US$57.8 million. ASAP acquired Renaissance Woodbridge for US$30 million and sold the property into EHT for US$67.1 million; the valuation adopted in the REIT is US$76.6 million.

ASAP acquired Doubletree by Hilton Salt Lake City in 2017 for US$31.38 million, the REIT acquired it for US$53.4 million at IPO and its valuation in the REIT is US$60.9 million.

Separately, questions are being asked about the repairs needed to keep The Queen Mary Long Beach operational. The lease agreement signed in 2016 between the City of Long Beach and Urban Commons – who is sponsor of EHT – is an annual rent paid to the City based on certain prescriptions such as base rent, pass through rent, percentage of net revenues and so on. The lease agreement calculates that the initial rent is around US$3.3 million a year. The 169-page lease agreement says the rents have annual escalations built in, in line with CPI. The lease is for 66 years.

In May this year, Urban Commons injected Queen Mary into EHT for which the REIT paid US$139.7 million. The major unitholders started to sell down EHT when memos and letters between the City and Urban Commons emerged in Sept and Oct, and the word default was mentioned in relation to repairs that need to be carried out by Urban Commons.

According to the lease agreement, the owner of Queen Mary allows Urban Commons to sublease the premises with Urban Commons securing the Landlord's prior written approval of all major subleases of above 20,000 sq ft.

While it is clear that the City owns the Queen Mary, it is not clear whether Urban Commons received permission to sublet the ship to EHT for US$139.5 million. In the event of default, the ship – presumably – reverts to the City.

Units in EHT are down a third to 52 US cents since its IPO price of 78 US cents. There is market talk that EHT’s manager may appeal to MAS for an early distribution of distributions per unit to unitholders after the release of its 3QFY2019 results instead of waiting till March 30, 2020. In addition, the EHT may announce a strategic review.

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