Long Beach’s Queen Mary has seen many operators struggle to make the historic ocean liner profitable over the decades.
There was Joe Prevratil, who signed a lease to run the ship in 1993 and later filed for Chapter 11 bankruptcy when the city demanded several million dollars in unpaid rent.
There was Save the Queen LLC, which bought the lease out of bankruptcy and then defaulted on its loan in 2009.
There was even the Walt Disney Co., which once operated the ship but bailed on its lease after a 1992 marine survey identified $27 million of needed repairs.
Long Beach has owned the Queen Mary since it arrived from Scotland in 1967 as a hotel and tourist attraction. It leases the ship to operators who are responsible for its care and daily maintenance.
And now the ship could see yet another new caretaker when the Queen Mary’s lease goes up for auction next month after its current operator, Eagle Hospitality Trust, filed for Chapter 11 bankruptcy in January.
In a March 9 announcement, Singapore-based Eagle Hospitality Trust said it will sell its interest in 15 of the 18 hotels in its portfolio, including the Queen Mary, Sheraton Pasadena and Holiday Inn Anaheim for a starting price of $470 million in an auction set tentatively for May 20.
The news comes after Eagle Hospitality suffered a string of financial problems as the COVID-19 pandemic ravaged the hospitality industry. But the company had shown signs of problems in 2019 before the pandemic, including a $341 million default on a loan from Bank of America.
Alan Tantleff of FTI Consulting, who was appointed as the chief restructuring officer in the bankruptcy, said Eagle has received an initial bid for the entire portfolio from a private investment firm called Monarch Alternative Capital.
However, Eagle could choose to sell the Queen Mary lease or any of its properties individually in the auction, he said, adding that it has received multiple offers for the Long Beach landmark. Tantleff said Eagle hopes to sell the Queen Mary lease individually to someone who recognizes the opportunities for development.
“The Queen Mary is a special asset that has tremendous redevelopment opportunity on the 45 acres of waterfront,” he said. “It’s a world-renowned asset and we hope the next custodian can allow it to reach its full potential.”
Tantleff said Eagle has been working with Long Beach city leaders and will remain responsible for the Queen Mary’s upkeep during the sale, an amount that is minimal because the ship’s hotel and meeting rooms have been closed to the public since last spring.
“The city of Long Beach has been extremely helpful in this process,” he said.
One of the main concerns for the future of the Queen Mary remains the huge costs for repairs and maintenance of the aging vessel.
A city-commissioned marine survey in 2015 projected costs of up to $289 million for urgent repairs over the next several years. Under its original agreement with Urban Commons, the city issued $23 million in bonds to fix some of the most critical repairs listed in the marine survey, but many of the repairs went over budget and the $23 million was spent before other critical projects could be addressed.
Long Beach City Auditor Laura Doud has raised questions on how Urban Commons spent the $23 million for repairs and is investigating. City officials, however, have said they have documentation for the approved work and everything was done properly.
Long Beach Economic Development Director John Keisler said in a March 16 statement that the mayor and City Council’s recommended $207 million pandemic recovery plan will go, in part, to help hotels and cultural attractions like the Queen Mary reopen to visitors.
“Once health orders related to COVID-19 are lifted and the new operator of the Queen Mary is identified, the City looks forward to restarting the preservation and development plans at the Queen Mary and the surrounding property,” Keisler said. “The long-term economic outlook for leisure, hospitality, and entertainment in Long Beach remains incredibly strong and the Queen Mary will be a centerpiece to that economic growth.”
Eagle Hospitality filed for bankruptcy on Jan. 18, with a total of more than $500 million in debts.
Former Queen Mary operator Urban Commons, which signed a 66-year lease to run the ship in 2016, created Eagle Hospitality in 2019 to list on the Singapore Stock Exchange with the goal of raising millions for a $250 million development project called Queen Mary Island.
Queen Mary Island was an ambitiously envisioned entertainment destination set on the current parking lot area that included a 2,400-foot-long boardwalk, cafes, bars, a 200-room hotel and a total of nearly 700,000 square feet of retail space.
It is now unclear when, or if, Queen Mary Island will be built, since Urban Commons hit tensions with the board of Eagle Hospitality and its shareholders when it didn’t fulfill financial obligations and repeatedly failed to pay rent for its portfolio of hotel properties. The problems culminated in September when Eagle Hospitality’s managers terminated the master lease agreements for Urban Commons’ hotels, including the Queen Mary—an action that essentially removed Urban Commons as the Queen Mary’s operator.
Urban Commons is now in legal disputes with Eagle Hospitality.
While the city has struggled with its lease arrangements over the years, Long Beach City Manager Tom Modica has said using an operator is still the best option. Under the lease agreement, the operator generates funds to maintain the Queen Mary through its events, hotel and Carnival cruise line passenger fees. He said no taxpayer funds are used to maintain the ship.
Urban Commons, when it managed the ship, found a way to make the surrounding land profitable as a music festival hotspot in partnerships with concert promoter Goldenvoice.
Before its separation from Eagle Hospitality, Urban Commons listed the Queen Mary as the most lucrative property in its hotel portfolio, with a total profit of $11.2 million in 2018, up from $6.5 million in 2017. A key driver was the increased concert revenue.
Modica said the Queen Mary’s future is tied to developing the surrounding waterfront, but that this also remains one of the biggest challenges because the area faces stricter environmental regulations.
For now, as in decades past, city leaders are hopeful that another Queen Mary suitor will see the potential.