Judge okays bulk of $32.1m claim by Ascendas against defunct Park Hotel Clarke Quay operator

Ascendas Hospitality Reit (AH-Reit), the landlord of the former Park Hotel Clarke Quay property in Unity Street, was allowed to claim the bulk of a $32.1 million sum for unpaid rent and other charges against the defunct former operator Park Hotel CQ (PHCQ) under a High Court ruling on May 23.

High Court Justice Audrey Lim reduced AH-Reit’s proof of debt to $31.1 million, after excluding $273,792 in property tax from Oct 1, 2022, to June 27, 2023, and costs totalling $679,454.

PHCQ was wound up by the High Court on Nov 19, 2021. This came after AH-Reit terminated its master lease with PHCQ on Aug 28, 2021, and took possession of the property after the hotel operator failed to pay $5.92 million in debt.

The hotel was then renamed Riverside Hotel Robertson Quay after CapitaLand unit Ascott International Management (AIMPL) took over from August 2021 to September 2022.

It was subsequently rebranded as The Robertson House by The Crest Collection, which opened in October 2023.

The $32.1 million claim comprises unpaid rent by PHCQ, charges payable during the handover of the property, property tax and other costs. About $25 million of the claim was disputed by another PHCQ creditor, Park Hotel Group Management (PHGM).

PHGM is owned by British Virgin Islands-incorporated Good Movement Holdings which is, in turn, owned by Mr Allen Law Ching Hung, the son of Hong Kong-based billionaire Law Kar Po.

Mr Allen Law was also the sole director and chief executive of PHCQ from April 3, 2013, until March 16, 2021, when he stepped down.

The $32.1 million claim includes a claim for net rent of $20.4 million for the remainder of the lease from Aug 28, 2021, to June 27, 2023. This comprises $27.2 million of rent, minus $8.2 million plus GST, the income earned by AH-Reit during that period to reduce its rental losses from PHCQ’s early termination.

PHGM argued that the liquidators had accepted the $8.2 million earned income figure without properly considering if AH-Reit had taken adequate measures to reduce its rental losses and whether it was reasonable to allow AIMPL, an entity related to AH-Reit, to operate the property from Aug 28, 2021, to Sept 29, 2022.

PHGM added that, instead of leasing the property to an independent third party, AH-Reit had subsequently entered into a related-party transaction with Ascott Hospitality Business Trust (AHBT) from Oct 1, 2022 onwards, with AIMPL continuing to manage the property.

But Justice Lim ruled that she did not find the arrangement “unreasonable”, and said the liquidators of PHCQ had “properly” accepted AH-Reit’s claim pertaining to $20.4 million in unpaid rent.

Furthermore, she agreed with the liquidators that it was speculative to assume that AH-Reit could have found another tenant willing to pay a higher rent.

“The property was essentially a hotel and the remaining duration of the lease, had it not been terminated, was short. At the time, Singapore was also just emerging from the Covid-19 pandemic,” said Justice Lim.

It is unclear how AH-Reit would have been able to find another tenant that would have been willing to take over the property’s lease and run the hotel, she added.

Although the judge ruled it was reasonable for AH-Reit to lease the property to AHBT from Oct 1, 2022, onwards, she reduced the claims for property tax incurred by AH-Reit for the period from Oct 1, 2022, to June 27, 2023.

“Neither AH-Reit nor the liquidators have explained why AH-Reit did not impose the obligation to pay property tax on AHBT under the AHBT lease, nor why the tax was borne by AH-Reit,” she noted.

“That the AHBT lease did not include an obligation on AHBT to bear the property tax is to be contrasted with the lease wherein PHCQ bore such an obligation,” she said.

“AH-Reit appears to have treated AHBT more favourably (compared with PHCQ) by not imposing an obligation on AHBT to pay property tax, only to then claim the property tax from PHCQ instead.”

She pointed out that the liquidators’ acceptance of AH-Reit’s property tax claim, made seemingly without any scrutiny, was unsatisfactory.

However, Justice Lim allowed the claim for $2.4 million in charges payable for the handover of the property from July 1, 2021, to Aug 27, 2021.

PHGM had disputed the claim, saying there was no explanation for why the handover of the property by PHCQ to AH-Reit took nearly two months when it could have been done in a day, and why the lease was terminated on Aug 28, 2021.

The liquidators argued that “to ensure a proper handover, sufficient time was needed for AH-Reit to get information on the hotel operations and for PHCQ to prepare the asset listing and liaise with various parties on the novation or termination of its existing contracts”.

PHCQ also had an agreement with the Singapore Land Authority during the pandemic to operate the property as a government quarantine facility (GQF) until Aug 27, 2021.

Hence, it was not unreasonable for AH-Reit to defer the property handover until it had obtained the licences or approvals to operate the property as a GQF if this would enable the property to generate a steady stream of income and reduce the amounts payable by PHCQ, the judge ruled.

Furthermore, PHCQ and AIMPL had to work with the National Trades Union Congress to ensure a smooth handover of employees.

“I am satisfied that the two-month handover period was not objectionable,” the judge ruled.

Source: The Business Times © SPH Media Limited. Permission required for reproduction.

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