More than two dozen companies affiliated with Urban Commons, the real estate company hired to manage the Queen Mary that owns hotels across southern California – including Pasadena, Anaheim and Palm Desert – have filed for bankruptcy.
The voluntary bankruptcy filings this week in the Delaware District of the U.S. Bankruptcy Court affect 27 subsidiaries and affiliates of the Eagle Hospitality Trust, which controls 18 U.S. properties through Urban Commons and other companies.
The companies listed on the bankruptcy filings included:
- Urban Commons Queensway, LLC, which oversees the Queen Mary;
- Urban Commons Cordova A, LLC, which oversees the Sheraton Pasadena Hotel;
- Urban Commons Anaheim HI, LLC, which oversees the Holiday Inn Hotel & Suites Anaheim;
- UCF 1, LLC, which oversees the Embassy Suites by Hilton Anaheim North; and
- Urban Commons Highway 111 A, LLC, which oversees the Embassy Suites by Hilton Palm Desert.
In a statement Wednesday evening, Urban Commons did not go directly to the bankruptcy filings, but said the coronavirus pandemic created “unexpected and unprecedented challenges” for the company. The statement also states that the various leases allow rents to be allocated in the event of pandemics.
“We have done everything in our power to unite in these uncertain times,” says the statement, “and to work together in amicable ways to provide the best chance of survival and success.”
By filing the Chapter 11 bankruptcy filing, the companies have indicated their intention to reorganize their structures to keep the companies alive and to pay the creditors over time.
Filing on Monday, January 18, came months later Pasadena sued first Urban Commons and some of its affiliates for failing to pay taxes and fees of $ 840,000 owed by the Sheraton Pasadena, owned by Urban Commons.
One of the Urban Commons affiliates, EHT SPH LLC, settled with the city in September and agreed to pay $ 209,561 every month from October 2020 through January this year. An additional payment will be made in February for any interest or penalties incurred during the planning period.
But that’s the last Pasadena City officials heard by the company.
Neither Urban Commons nor its employees or affiliates made the promised payments to the city, and they are already below $ 630,000, according to a December lawsuit by Pasadena.
The city called on the courts to force Urban Commons or one of its employees to spit the $ 840,000 it agreed to pay the city to end the dispute. Since then, the amount of money owed has increased to around $ 1 million, according to Javan Rad, the assistant attorney general.
The company Pasadena settled with was not among the companies to file for bankruptcy this week, and Rad said Wednesday the city would continue its legal efforts.
“We will continue our litigation,” he said in a statement, “in our efforts to collect about a million dollars in misappropriated taxes.”
The real estate company had similar, if less extreme, problems in Long Beach. City officials at the end of 2019 gave a notice to the company that it was in danger of defaulting on its Queen Mary lease because it failed to complete urgent repairs. Around the same time, Long Beach’s inspector for the Queen Mary began to speak publicly about the lack of maintenance and repairs he saw on the ship.
But the city early last year ended his long-term contract with the inspector.
However, Long Beach officials have repeatedly faced criticism from Urban Commons.
“I can say without reservation that the ship is far safer than it was three years ago or the day before Urban Commons took over the contract,” said John Keisler, director of economic development for Long Beach, in a 2019 interview after advising the ship that it could default on its lease.
But in December 2019, city inspector Laura Doud announced that they would start an audit of the city’s Queen Mary lease with Urban Commons. Doud has not yet published the results of this review.
A city statement on Wednesday said Long Beach was “concerned” with the bankruptcy filings.
“The city is concerned about this development as the company has a long-term obligation to ensure the maintenance and operation of the city’s assets,” the statement said. “The city will be soliciting information from (Eagle Hospitality Trust) to understand its immediate operational plans and will take appropriate legal steps in the process to ensure the city and the Queen Mary are protected.”
Tom Modica, City Manager of Long Beach, will be planning an open discussion with the city council next month “to review the situation, future plans and requirements that EHT is placing on the city under the Master Lease.”
Anaheim, meanwhile, didn’t say what impact the bankruptcy filings could have on that city.
Anaheim spokesman Mike Lyster said he couldn’t comment on whether the city is facing similar problems as Pasadena and Long Beach in working with Urban Commons. However, regarding the impact of the bankruptcy filings on the city, Lyster said it was already clear that the coronavirus pandemic had hit the hotel industry particularly hard.
“We never want to see the uncertainty of bankruptcy touch hotels in Anaheim,” he said in an email. “While this submission seems to have some unique factors, the coronavirus economic crisis has hit hotels in our city hard. We are preparing for other cases in which hotel operators cannot hold out in these challenging times.
“Fortunately, we are seeing progress in fighting COVID-19 cases and vaccinating people here in Anaheim with the aim of saving lives and reopening our economy,” added Lyster. “At the right time, we expect the Anaheim hotel and tourism industries to recover.”
Palm Desert representatives did not respond to requests for comment.
Urban Commons, meanwhile, said in its statement that allegations against him wrongly placed the blame for the negative impact of the coronavirus pandemic on the company.
“While COVID-19 has hit our traits hard, we are not the scapegoat for its effects,” the statement said, “but these claims against us only began after the pandemic broke out.”
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