GROREIT moves to reclaim Royal Orchid asset after ROH misses buy-back deadline

A major property and trust deal has shaken Thailand’s real-estate investment sector after Royal Orchid Hotel (Thailand) Plc, or ROH, failed to complete the scheduled buy-back of the Royal Orchid Sheraton asset worth 4.873 billion baht.

The asset forms part of the Grande Royal Orchid Hospitality Real Estate Investment Trust with Buy-Back Condition, or GROREIT.

ONE Asset Management Limited, as GROREIT’s trust manager, and MFC Asset Management Plc, as trustee, have now notified ROH to return the asset within 30 days. After that, the trust plans to arrange a new valuation and proceed with an auction for new investors.

Buy-back right ends immediately

Alongkorn Prathanrasnikorn, chief real estate and trust officer at ONE Asset Management, said the trust agreement originally gave ROH and related companies the right to repurchase the asset after five years.

The final exercise date was set for July 14, 2026, at a value of 4.873 billion baht.

However, when the deadline arrived, ROH was unable to make payment under the contract. This is considered a default, meaning its buy-back right ended immediately.

30-day countdown for asset handover

After the contractual deadline passed, the counterparty no longer had the right to repurchase the asset at the original price, while the right to manage the hotel also ended.

GROREIT has now instructed ROH to return the asset within 30 days, with the deadline falling in mid-August.

If the asset is not handed over by then, the trust will exercise its legal rights to protect the interests of unitholders.

Despite the contractual default, the hotel business continues to operate as normal.

The trust has informed Starwood, the hotel operator under the Sheraton brand within Marriott International, to continue managing the hotel directly on behalf of the trust. The move is intended to avoid any impact on guests, customers and business partners.

Once the asset has been returned and Starwood is managing the hotel for the trust, GROREIT will consider seeking approval from trust unitholders to sell the asset and return proceeds to them.

The entire process is expected to be completed within 2026.

Hotel remains profitable

Alongkorn said the default does not reflect the hotel’s operating performance.

The hotel still generated net profit of 323 million baht, while average occupancy throughout the year stood at 72-77%, a level considered strong compared with the current hotel industry.

He said the issue was therefore related to financing for the contractual buy-back, rather than the hotel’s business operations.

Eight buyers interested, B4.8bn seen as minimum

After the asset is handed over, the trust will appoint an independent appraiser to assess its value again before opening an auction to interested investors.

The sale price will be based on the current valuation range of around 4.8-5.2 billion baht, and will no longer be limited by the previous buy-back condition.

“Once the buy-back right has ended, if the original buyer wishes to regain the asset, it must compete in the auction like other investors. It can no longer use the original contractual buy-back price. At present, eight domestic and foreign investors have expressed interest in the asset, and the final price could be higher than the original buy-back price,” Alongkorn said.

He added that proceeds from the asset sale would first be used to repay Government Savings Bank, the first-ranking mortgage creditor. The outstanding debt currently stands at 1.35 billion baht.

After that, the remaining proceeds, after deducting related expenses, will be distributed to trust unitholders according to their rights.

GROREIT invested in the hotel asset in 2021 for a total value of 4.5 billion baht, using a 1.35-billion-baht loan from Government Savings Bank and 3.15 billion baht raised from trust unitholders.

Throughout the investment period, unitholders have continued to receive distributions from the trust’s operating results. As the asset owner, the trust is legally entitled to income from the hotel’s performance.

The hotel is viewed as having long-term income and return potential, supported by its riverside location on the Chao Phraya River, proximity to key tourist attractions and business districts, and management by an international hotel operator under a leading global brand.

ONEAM to meet SEC next week

Pote Harinasuta, chief executive officer of ONE Asset Management, said unitholders had already received accumulated returns of 24-27%, or an average of around 6% per year, throughout the project.

For the next operating period, the trust maintains a policy of distributing benefits of no less than 90% of net profit.

GROREIT currently has around 1,600 unitholders, and ONEAM places importance on protecting the interests of all of them.

KGI Securities (Thailand) Plc, the parent company of ONEAM, is GROREIT’s largest unitholder with a 22.84% stake, having invested 700 million baht in trust units. It has closely monitored developments throughout the process.

“After the asset buy-back structure has ended, the trust will discuss with the Securities and Exchange Commission next week to determine the operational roadmap,” Pote said.

Debt structure and expected returns

Government Savings Bank is the trust’s first-ranking creditor under the mortgage agreement, with outstanding debt of 1.35 billion baht.

The trust has an interest burden of MLR minus 1.6%, or slightly above 4%, equivalent to interest costs of around 60-70 million baht per year.

The previous valuation of the asset stood at 5.2 billion baht. The trust bought the asset in 2021 for 4.5 billion baht, while the 4.873-billion-baht price was tied to the contractual buy-back condition and was the price set for the ROH group to exercise its repurchase right.

That price was calculated based on the target internal rate of return that the trust was required to deliver to unitholders.

The 4.873-billion-baht figure will now serve as the minimum reference for negotiation or auction. If the asset can be sold for 4.873 billion baht or higher, unitholders are expected to receive around 11 baht per unit, after debt and related expenses are deducted, compared with a par value of 10 baht per unit. This would represent a return of around 8% per year.

MFC insists contract terms were not changed

Thanachote Rungsitivat, managing director of MFC Asset Management Plc, said in his capacity as trustee that MFC had not changed any contract terms.

He said the trustee had tried to be flexible in line with ROH’s requests and had clarified the matter to the Stock Exchange of Thailand.

He said discussions on July 2, 2026, among ROH, ONEAM, MFC and Government Savings Bank found that ROH had informed the parties of a new investor interested in repurchasing the asset.

However, that investor was concerned about the process of releasing the mortgage with Government Savings Bank. The bank said it would need to receive one full lump-sum payment, or gross fund, before releasing the mortgage.

ROH then asked to split the payment into two parts: one payment to Government Savings Bank to clear the mortgage obligation, and another payment to the fund.

MFC said that, to facilitate and accommodate ROH’s request, it replied in writing on July 8, 2026, saying the requested arrangement could be implemented.

However, on July 13, MFC received a letter from ROH dated July 10 claiming that MFC’s proposal did not comply with the original contract.

MFC responded on the same day that if ROH viewed the arrangement it had requested as a breach of contract, then ROH should revert to the original agreement and pay in one lump sum.

The parties made an appointment at the Land Department on July 14, but ROH did not bring the money for payment.

MFC therefore said it had never changed the contract.

“Our intention was to help them bring the money back to return to investors. What we did was flexibility in line with their request,” Thanachote said.

Asset management plan within 30 days

Following the payment default, Thanachote said ROH’s buy-back right had ended because it did not exercise the right by the deadline.

From now, within 30 days, the fund manager, ONEAM, will gather rights and manage contracts so that the asset fully returns to the fund.

If no progress is made during that period in a way that delivers maximum benefit to unitholders, MFC, as trustee, will discuss other options with the fund manager.

These could include opening an auction or conducting a public sale to bring proceeds back to trust unitholders. Closure of the fund would require the asset sale process to be completed first.

Thanachote said many interested parties had already contacted the trust. All procedures will focus on transparency and must receive approval from unitholders before proceeding.

Regarding the debt owed to Government Savings Bank, MFC and ONEAM have already held preliminary discussions and are formally requesting an extension of the repayment period.

Thanachote sought to reassure investors that GROREIT unitholders remain the owners of the asset, and that a public sale could generate returns higher than the previous 4.873-billion-baht valuation.

“This incident is specific to this lease-purchase counterparty, and MFC will continue to perform its supervisory duty to protect the best interests of unitholders,” he said.

 

Source: Krungthep Turakij