ONEAM moves to sell disputed hotel

One Asset Management (ONEAM), the manager of Grand Royal Orchid Hospitality Real Estate Investment Trust (GROREIT), has begun legal procedures after Royal Orchid Hotel (Thailand) (ROH) failed to repurchase the 4.87-billion-baht Royal Orchid Sheraton Riverside by the deadline, resulting in a default under the five-year buyback agreement.

According to Alongkorn Prathanrasnikorn, chief property and trust officer at ONEAM, Tuesday marked the expiry of the five-year period since GROREIT acquired the hotel under a sale-and-buyback arrangement, under which ROH was required to repurchase the property for 4.873 billion baht, excluding value-added tax.

As the payment was not made by the deadline, ONEAM, acting as REIT manager, together with MFC Asset Management, the trustee of GROREIT, initiated contractual procedures to safeguard the interests of trust unitholders. ROH was given 30 days to return possession of the hotel to the trust. If the company fails to comply, ONEAM said it plans to pursue legal action for breach of contract.

Once the 30-day period expires, the trust plans to convene a meeting of unitholders to seek approval for an auction of the hotel assets, with proceeds to be distributed to investors, said Mr Alongkorn.

ONEAM chief executive Pote Harinasuta said if the asset handover proceeds according to the legal process, unitholders are expected to receive repayment of their investment by January 2027.

He said ONEAM is confident an auction would attract multiple bidders as several domestic and international investors have expressed interest in acquiring the property during the past 5-6 months.

"We informed all interested parties that they should negotiate with the original owner because the fund agreement required ROH to exercise its buyback right first," said Mr Pote. "ROH had five years from the establishment of the trust to secure financing. Throughout that period, the fund repeatedly reminded the company that the buyback deadline was approaching. Ultimately, it was unable to complete the purchase."

Under the contract, ownership of the hotel now rests fully with the trust. Should ROH wish to regain ownership of the property, it would need to participate in the auction process on the same terms as other bidders.

The trust formally notified Starwood, the operator of the Sheraton hotel brand, to assume management of the hotel on behalf of the trust once the asset transfer is completed. ONEAM expects the entire process could be completed within this year, although the timeline remains preliminary, depending on the successful transfer of possession.

The trust acquired the hotel in 2021 for roughly 4.5 billion baht, financed by a 1.35-billion-baht loan from Government Savings Bank (GSB) and around 3.15 billion baht raised from public investors. The hotel continues to operate while the trust remains entitled to receive income generated by the hotel under applicable agreements.

Meanwhile, MFC disclosed details of an online meeting held on July 2 involving representatives of ROH, ONEAM, MFC, GSB, and parties introduced by ROH as prospective lenders. According to MFC, the prospective financiers sought clarification on the payment and asset transfer process before providing financing for the planned buyback.

The hotel remained mortgaged to GSB, requiring the loan to be repaid before the mortgage could be released and ownership transferred from GROREIT back to ROH.

GSB advised that payment by cashier's cheque could delay settlement because of cheque confirmation and clearing procedures, potentially preventing all ownership transfers from being completed on the same day. Prospective lenders proposed splitting the payment, with one transfer made directly to GSB to repay the outstanding loan, and another to GROREIT through Thailand's Bahtnet payment system.

MFC said neither GSB nor GROREIT objected to the proposed payment structure, and ROH subsequently requested detailed payment instructions for prospective lenders. MFC later sent ROH a letter on July 8 outlining the agreed payment process.

However, ROH failed to complete the buyback before the contractual deadline of July 14, triggering the legal enforcement process.

ROH managing director Vitavas Vibhagool reiterated that the hotel operator has no intention of abandoning the asset repurchase due to funding constraints. The company is fully prepared financially, supported by Singapore-based private credit investment manager OCP Asia, he told Thansettakij, adding the financing has already been approved and the relevant agreements completed.

The facility is worth US$187 million, or 5.6-5.7 billion baht, and was earmarked for the asset repurchase. Around 500 million baht was set aside for hotel renovations and working capital requirements.

Mr Vitavas said the delay that prevented the transaction from being completed involved disagreements over the payment structure. MFC requested ROH transfer the payment through the Bahtnet system before the fund would proceed with redeeming the title deeds and completing other procedures required to hand over the assets.

"This arrangement was unacceptable to ROH's financiers because it would require funds to be transferred before the assets were delivered, exposing lenders to unnecessary risk," he said.

The contract clearly stipulated the transaction must be conducted on a "same-time" basis, under which payment and transfer of title deeds take place simultaneously, noted Mr Vitavas. This structure offers protection and certainty for all parties and is standard practice in property transactions, which are typically completed at the Land Department through the simultaneous exchange of funds and ownership documents, he said.