Royal Orchid Hotel and ONEAM clash over Bt4.87bn Sheraton buy-back

Royal Orchid Hotel (Thailand) Plc and One Asset Management Company Limited, or ONEAM, are at odds over a Bt4.873-billion mandatory buy-back of the property used for the Royal Orchid Sheraton Riverside Bangkok hotel after the July 14 deadline passed without a transfer of ownership.

ONEAM, acting as manager of the Grand Royal Orchid Hospitality Real Estate Investment Trust with Buy-Back Condition, or GROREIT, said Royal Orchid Hotel failed to repurchase the assets and accept their transfer at the relevant land office as required under the sale agreement.

Royal Orchid Hotel disputed that account, saying it remained committed to the buy-back but could not follow the payment method communicated by MFC Asset Management, GROREIT’s trustee, because the method did not comply with the contractual terms.

The stand-off has delayed GROREIT’s planned exit from its investment in the five-star riverside hotel, including the repayment of trust borrowings, the return of proceeds to unitholders and the eventual dissolution of the trust. It has also opened a separate disagreement over whether Royal Orchid Hotel’s lease has expired and who has authority over hotel operations while the transaction remains unresolved.

Buy-back deadline passes without property transfer

GROREIT acquired the freehold rights to the Royal Orchid Sheraton Hotel & Towers project from Royal Orchid Hotel under a sale-and-leaseback structure. Royal Orchid Hotel, the original owner, then leased the assets back to continue operating the hotel business.

The SET describes Royal Orchid Hotel as the former owner, lessee and purchaser under the asset buy-back arrangement. ONEAM serves as the trust manager, while MFC Asset Management is the trustee.

Under the agreement for the sale and purchase of the project’s immovable and movable assets, Royal Orchid Hotel was required to buy the property back at the end of the fifth lease year, on July 14, for an agreed price of Bt4.873 billion, excluding value-added tax.

Had the transaction been completed, GROREIT intended to use the sale proceeds to repay its borrowings, distribute the remaining proceeds to unitholders and proceed with the trust’s dissolution in accordance with Securities and Exchange Commission regulations.

ONEAM said the buy-back and ownership transfer were not completed at the land office on the contractual deadline. Royal Orchid Hotel, however, said an authorised representative attended the land office that day to explain the company’s objections to the proposed payment procedure.

Trustee moves to protect the property and hotel operations

Following the unsuccessful transfer, ONEAM informed MFC of the situation and outlined several steps the trustee would take.

MFC planned to send Royal Orchid Hotel a formal notice stating that the company had not completed the buy-back and that the lease period had ended. Royal Orchid Hotel would be asked to cooperate with representatives of the trust manager and trustee and to comply with the relevant agreements within 30 days of the notice.

The trustee also intended to notify Starwood Hotels & Resorts Worldwide of the claimed expiry of Royal Orchid Hotel’s lease. According to ONEAM, MFC would temporarily engage Starwood directly to manage the hotel and maintain uninterrupted operations.

MFC also planned to approach Government Savings Bank to seek an extension of the trust’s debt repayment period, together with any necessary waivers and consents under the loan terms.

ONEAM and MFC said they would jointly consider further options for the property, taking into account the interests of GROREIT and its unitholders and the applicable SEC regulations.

Royal Orchid Hotel challenges payment mechanism

Royal Orchid Hotel said the failure to complete the transaction did not result from an unwillingness or inability to repurchase the assets.

The company said MFC had previously sent it instructions setting out a method for paying the buy-back price. Royal Orchid Hotel maintained that the proposed method was inconsistent with the agreement and said it had asked the trustee to correct what it regarded as a contractual breach.

Royal Orchid Hotel said its authorised representative attended the land office on July 14 to explain the issue. It added that the process of completing the buy-back in accordance with the contractual provisions was continuing.

The company insisted it faced no obstacle to buying back the property and maintained that it retained the right to continue overseeing the hotel in the meantime.

It said further details about the parties’ differing interpretations of the agreement would be disclosed once a clear resolution had been reached, to avoid creating confusion among shareholders, investors and other parties.

Ownership outcome and operating authority remain unresolved

The competing statements indicate that both sides expect the Royal Orchid Sheraton to remain operational. Their disagreement centres instead on the payment mechanism, the status of the lease, authority over the hotel’s management and the timetable for completing—or replacing—the agreed buy-back.

ONEAM and MFC are treating the July 14 deadline as having passed without contractual performance and are preparing to take control-related and lender-protection measures. Royal Orchid Hotel maintains that the transaction remains capable of completion once the disputed payment procedure is resolved.

Until the parties reach an agreement or take further contractual or legal action, uncertainty is likely to remain over GROREIT’s exit plan and the future ownership structure of one of Bangkok’s best-known riverside hotel properties.