AWC seeds new AWR REIT with five assets worth 48.4bn baht

Asset World Corp Public Company Limited (AWC) has unveiled the first five premium properties earmarked for its new multi-sector real estate investment trust, AWR REIT, with a combined minimum sale value of 48.449 billion baht.

The move marks a major shift in AWC’s business model as the property group seeks to recycle capital from mature assets into new developments while creating a separate platform for income-generating properties.

AWC’s board on Friday (September 25) approved the proposed disposal of five assets to AWC Lifestyle Properties Real Estate Investment Trust (AWR), subject to several conditions, including the establishment and financing of the trust, required consents and satisfactory due diligence.

The minimum prices are based on valuations by two independent appraisers and exclude value-added tax, specific business tax, stamp duty and other transaction expenses.

Five flagship properties to seed AWR

The initial portfolio comprises four hotels and one Grade A commercial property:

1. The Empire — minimum value of 25.107 billion baht. The Bangkok office and lifestyle complex has net lettable area of 158,021 square metres and gross floor area exceeding 316,000 sq m.
2. Banyan Tree Samui — 6.463 billion baht. The luxury resort comprises 88 pool villas with gross floor area of 25,727 sq m.
3. Pattaya Marriott Resort and Spa — 6.1 billion baht. The Na Jomtien property has 287 rooms and suites and gross floor area of 30,898 sq m.
4. Meliá Koh Samui — 5.895 billion baht. The Choeng Mon beachfront resort has 200 rooms and suites and gross floor area of 25,408 sq m.
5. Banyan Tree Krabi — 4.884 billion baht. The Tubkaek Beach luxury resort has 72 suites and villas and gross floor area of 20,666 sq m.

AWC said the five properties were selected as mature, premium freehold assets with established operating performance and potential to generate recurring income.

AWC shifts towards ‘Development Engine’ model

Wallapa Traisorat, Chief Executive Officer and President of AWC, described the company’s future role as a “Development Engine” — developing properties from their early stages until they mature and produce stable returns, before potentially transferring them to AWR.

She likened the model to raising “golden hens”, drawing on an analogy she attributed to her father, Charoen Sirivadhanabhakdi.

Under the concept, AWC develops the assets until they become established cash-generating properties, while AWR becomes what Wallapa described as the “golden hen farm” holding mature assets and generating recurring returns for trust unitholders.

The proceeds released from mature properties can then be recycled by AWC into the next generation of developments.

AWC had previously held its developed assets predominantly on its own balance sheet. The company said its property portfolio had expanded from around 96 billion baht at the time of its stock-market listing to more than 224 billion baht.

AWC listed on the Stock Exchange of Thailand in October 2019 at an IPO price of 6 baht per share.

Asset sales to unlock capital gains and cash flow

AWC argues that the REIT structure will allow investors to see more clearly the cash generated by mature assets and enable the company to realise gains from property development.

According to the company, accumulated fair-value gains in its commercial-property portfolio amount to about 45 billion baht that have not yet been realised through property sales.

The initial transfer to AWR could allow AWC to recognise approximately 5 billion baht of fair-value gains, according to the source.

AWC expects its future earnings model to comprise about 70% recurring income and 30% capital gains and property-management or development profits.

The company is targeting a double-digit total return for AWR investors, although actual returns will depend on the final acquisition structure, financing costs and future operating performance.

Hotels to be leased back after sale

AWC plans to retain an operating role after the assets are transferred.

For the hotel properties, newly established subsidiary AWC Hotel Property Co., Ltd. (AWR-Hs) will lease the properties from the REIT and continue operating the hotel businesses.

A second subsidiary, AWC Commercial Property Manager Co., Ltd. (AWR-R), will manage The Empire on behalf of AWR.

AWR-Hs will have initial registered capital of approximately 199.99 million baht, while AWR-R will start with about 9.99 million baht. Both are scheduled to be established in September, with AWC holding virtually all of their shares.

The REIT manager is meanwhile preparing the registration statement for submission to the Securities and Exchange Commission, while AWC continues to work on the contractual terms surrounding the trust.

The transaction cannot proceed until the relevant conditions are satisfied, including sufficient equity or debt financing for AWR.

IPO could raise more than 30bn baht

AWC is considering an initial public offering of AWR trust units worth around US$1 billion, or more than 30 billion baht.

The company plans to subscribe for no more than 28% of the trust units, maintaining a long-term relationship with AWR while allowing outside investors to participate.

The proposed investor structure would allocate more than half of the units to domestic investors, with foreign institutional investors accounting for no more than 50%, according to the source.

AWC wants the trust to attract both institutional and retail investors in Thailand and overseas, positioning AWR as a major investment platform for premium Thai real estate.

Nine more projects prepared for future pipeline

AWC is also studying another nine properties for possible future transfers to AWR. Together, they account for about 3,100 hotel rooms and 32,235 sq m of net lettable area.

They are Asiatique The Riverfront Destination, Bangkok Marriott Hotel The Surawongse, Bangkok Marriott Marquis Queen’s Park, The Ritz-Carlton Phuket Resort and Spa, Fairmont Bangkok Sukhumvit, Phuket Marriott Resort & Spa, Nai Yang Beach, Kimpton Hua Hin Resort and Beach Club, The Plaza Athénée Nobu Hotel and Spa Bangkok and InterContinental Chiang Mai The Mae Ping.

The pipeline is intended to give AWR a continuing source of mature properties as AWC develops more projects.

AWC had already disclosed in August that it was studying a REIT with an initial asset value of up to around 50 billion baht as part of its longer-term strategy to separate property development from the ownership of established income-producing assets.

REIT becomes new pillar of AWC growth model

The proposed structure represents a significant departure from AWC’s previous asset-heavy model.

Instead of retaining every completed property indefinitely, the group plans to develop, incubate and grow assets before transferring selected mature properties to the REIT.

AWC would then redeploy the capital into new hotels, commercial properties and lifestyle destinations.

For Wallapa, the model is intended to create a cycle in which AWC continues producing new income-generating assets while AWR builds a portfolio of established properties capable of generating recurring distributions.

The broader objective is to unlock property values, improve capital efficiency and provide AWC with additional financial capacity to accelerate future development.

Source: Krungthep Turakij