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It is not likely that the Yuans and UC "did not know each other" prior to the IPO. Though, they may not have trust each other very much, either.
A possible narrative is that UC agreed to buy Yuan's 6 hotels at a higher than market price, and in exchange, Yuan agreed to subscribe to EHT shares during the IPO.
UC, having bought the 6 hotels at slightly inflated value, sells it to EHT at a yet slightly higher valuation. The basis of the higher valuation, as stated by EHT, was due to the master leases with UC. So in other words, UC may have offloaded the hotels at a higher valuation, but in exchange, had to agree to pay higher rents to EHT.
The Yuans, who may have at first felt quit good about the deal, were alarmed when the reports surfaced on the potential liabilities that EHT is exposed to, due to UC possibly defaulting on the rectification works required for QM.
Possibly feeling quite upset that they were had by UC's possible overvaluation of QM, the Yuans decided to cut their losses by reducing their stake.
All these are, of course, just my speculation.
The QM has long been known to be an old and ageing ship. The gulf in the estimated maintenance bill can be understood to represents different interests.
On the one hand, there is UC, which is only interested in the ship being able to float, with plumbing and electricity; the bare necessities to function as a hotel. So you can expect them to want to keep capex as low as possible.
On the other hand, there are people who perceive UC and the City of Long Beach as being responsible for restoring the ship to near seaworthy state.
The truth is probably somewhere between the two extremes. The ship may not need new hulls, but corrosion is an important issue which needs to be addressed, especially for a vessel which carries hundreds of people at any time.
The larger concern for EHT, which should now be clear to most, is the long-term intent of UC.
Does UC hope to create long-term value to unitholders?
Was it UC's intention to offload assets at overvalued prices, and just slowly walk away?
Will UC renew the master leases with EHT at more or less favourable rates, when they expire?
The hotel properties may be physically in existence. But will they fetch as much if put on the resale market?
If EHT's valuation is impaired, for whatever reasons, will there be a rights issue to maintain the gearing ratio?
And when EHT's loans are due for renewal, how will their bankers reprice them?
Investors should find out the P&L of the hotels leased to UC, to ascertain whether the rents that UC is paying to EHT is sustainable. This will then give investors a hint on how much rent UC will likely pay, when the master leases are renewed. If they are renewed.
https://links.sgx.com/FileOpen/EHT%20-%2...eID=584184
A possible narrative is that UC agreed to buy Yuan's 6 hotels at a higher than market price, and in exchange, Yuan agreed to subscribe to EHT shares during the IPO.
UC, having bought the 6 hotels at slightly inflated value, sells it to EHT at a yet slightly higher valuation. The basis of the higher valuation, as stated by EHT, was due to the master leases with UC. So in other words, UC may have offloaded the hotels at a higher valuation, but in exchange, had to agree to pay higher rents to EHT.
The Yuans, who may have at first felt quit good about the deal, were alarmed when the reports surfaced on the potential liabilities that EHT is exposed to, due to UC possibly defaulting on the rectification works required for QM.
Possibly feeling quite upset that they were had by UC's possible overvaluation of QM, the Yuans decided to cut their losses by reducing their stake.
All these are, of course, just my speculation.
The QM has long been known to be an old and ageing ship. The gulf in the estimated maintenance bill can be understood to represents different interests.
On the one hand, there is UC, which is only interested in the ship being able to float, with plumbing and electricity; the bare necessities to function as a hotel. So you can expect them to want to keep capex as low as possible.
On the other hand, there are people who perceive UC and the City of Long Beach as being responsible for restoring the ship to near seaworthy state.
The truth is probably somewhere between the two extremes. The ship may not need new hulls, but corrosion is an important issue which needs to be addressed, especially for a vessel which carries hundreds of people at any time.
The larger concern for EHT, which should now be clear to most, is the long-term intent of UC.
Does UC hope to create long-term value to unitholders?
Was it UC's intention to offload assets at overvalued prices, and just slowly walk away?
Will UC renew the master leases with EHT at more or less favourable rates, when they expire?
The hotel properties may be physically in existence. But will they fetch as much if put on the resale market?
If EHT's valuation is impaired, for whatever reasons, will there be a rights issue to maintain the gearing ratio?
And when EHT's loans are due for renewal, how will their bankers reprice them?
Investors should find out the P&L of the hotels leased to UC, to ascertain whether the rents that UC is paying to EHT is sustainable. This will then give investors a hint on how much rent UC will likely pay, when the master leases are renewed. If they are renewed.
https://links.sgx.com/FileOpen/EHT%20-%2...eID=584184