Queen Mary in $21M Dispute

In January 2020, Eagle Hospitality Trust officially filed for Chapter 11 bankruptcy since the previous operator of the Queen Mary Urban Commons, was struggling financially even though they were lent almost $23 million to fix minor repairs by the City of Long Beach. This forced Urban Commons to leave the primary operator title to Eagle Hospitality Trust, but they are still left with all the legal and financial problems that are ongoing with the city.

Because of the bankruptcy, there is an auction on May 20 that is being held for the Queen Mary’s primary operator title. As the auction for the lease agreement begins to approach, Urban Commons is forced to pay debts such as: repairs the ship needs, past due rent, as well as other obligations the lease agreement requires, which Totals to around $21 million.

In 2016, Urban Commons signed a 66-year lease agreement to run the city-owned ship, making it responsible for any maintenance and repairs that were needed. Then, in 2017, $23 million in bonds and Tidelands funds were issued to Urban Commons by the city to fix the most critical repairs, but Urban Commons has apparently been unable to account for the money that was issued.

Repairs that are a necessity consist of the lifeboat support structures, generators, leaks and other wear that requires attention. Though some of the repairs that were requested to be fixed were completed, most were done incorrectly and will likely need to be re-done. The hull has structural and watertight integrity issues which can cause the ship to flood or in worst cases, capsize. The lifeboat support structures are by far the highest priority considering that a lifeboat can collapse from the supportive structure and cause injury or even fatalities to guests, visitors and employees.

“They haven’t fallen yet, so there might be some argument about how likely they are to fail and fall,” Deputy City Attorney Rich Anthony said in a phone interview Wednesday, April 14.

On top of that, Urban Commons has proposed to only pay $748,157 in unpaid rent as well as other small fees, when the city claims they owe $926,783. They also owe the city $636,447 in passenger fees for the nearby Carnival Cruise terminal, $65,336 in bounced checks from Catalina Express pass-through fees as well as more than $58,000 in utilities, and lastly $9,558 in special event fees. Anthony explained that any funds that are recovered in the bankruptcy will go to the new leaseholder to help repair the ship.

Long Beach City Auditor Laura Doud is investigating Urban Commons and indicated the company has yet to provide electronic check register, cash account details, bank statements and canceled checks, cashier’s checks, wire transfers or other payments made to vendors and subcontractors relating to the $23 million funded by the city.

In addition, Urban Commons has not paid county property taxes on the Queen Mary as part of its lease agreement since at least 2019. The Los Angeles County Treasurer and Tax Collector has filed two claims which state one for $848,112 and another for $5.2 million.

Long Beach Economic Development Director John Keisler, whose department is in charge of overseeing the Queen Mary lease and projects, discussed how Urban Commons was responsible for keeping records on how it paid its numerous staff members and subcontractors, but they have not been able to provide records to the city, which is why they are undergoing an audit investigation.

The complexity of the lease agreement between Urban Commons and the City of Long Beach means there are a lot of details to be worked out in court before the bankruptcy case can be finalized.

This has forced the May 20 auction of the Queen Mary’s lease, to possibly be delayed. Monarch Alternative Capital, a private investment firm, has offered a $15 million bid for the Queen Mary’s lease, but a higher bidder could win in the auction.

“Whoever the bidders are at the auction, they are going to want to know what the general monetary value of outstanding defaults are because, under the lease, they’re going to inherit those obligations. I think that these need to be ironed out before the auction, but I’m not sure that they necessarily will be.” said Anthony.

The city is currently exploring whether to transfer management of the Queen Mary as well as Pier H in the Port of Long Beach to the Board of Harbor Commissioners since they have managed the pier up until 1992.

City staff members are researching the idea and are set to report back to the City Council with more information by early June.

The Mayor Robert Garcia, and other City Council members discussed earlier this month how they believe that giving authority back to the harbor commission is a logical move since they have had experience in oversight of the ship and its pier before. “The folks that manage piers the best in our city is our Harbor Department.” said Garcia.

As of right now, the city said in a statement last Monday that the Queen Mary does not have a reopening date scheduled at this time and will not be reopened until the future operator fixes all the safety issues.