B5.3bn sale of Royal Orchid Sheraton approved

Unitholders of the Grande Royal Orchid Hospitality Real Estate Investment Trust (GROREIT) have approved the sale of the Royal Orchid Sheraton Hotel in Bangkok to a new investor for 5.3 billion baht, rejecting a lower buyback offer from the luxury property’s original owner, SET-listed Royal Orchid Hotel (Thailand) Plc.

The sale would be made on the condition that payment will be made within 14 days. If negotiations fail or the buyer cannot meet the terms, a new auction will be held to find another buyer.

One Asset Management (ONEAM), the trust manager, plans to terminate the existing arrangement and sign a sale and purchase agreement with Orchid Hospitality within two days, according to chief executive Pote Harinasuta.

The buyer will place a 100-million-baht deposit upon signing and pay the remaining 5.2 billion baht within 14 days, or by Nov 11, Mr Pote said on Wednesday.

Orchid Hospitality, managed by property investor Suchad Chiaranussati, owns hotels in the surrounding area, including the Millennium Hilton Bangkok, and also has hotel interests in Singapore, Japan and Vietnam.

The investor’s familiarity with the location and property is expected to shorten due diligence, which could otherwise take two to three months, while its financial readiness supports the tight completion schedule, said Mr Pote.

The 5.3-billion-baht offer exceeds the latest appraised value of 5.2 billion baht. The proposed sale is expected to deliver an internal rate of return of nearly 9% to unitholders, above the original target of 8%.

Following completion, GROREIT will use the proceeds to repay 1.35 billion baht owed to the Government Savings Bank before distributing the remaining funds to unitholders.

The trust has said the distribution could amount to about 10 baht per unit in returned capital, plus a further 2 baht per unit in gains, or 12 baht in total.

The lender has approved a six-month extension of the loan, until January, subject to a restriction on distributions until the debt is fully repaid. Completing the sale promptly would lower interest rate costs and exposure to financing-related risks.

ONEAM aims to complete the repayment and liquidation process by the end of November, subject to the required procedures and approvals, Mr Pote added.

According to Mr Pote, if the Orchid Hospitality transaction fails, the trust will proceed with an open auction, a process expected to take about six months. More than 20 major investors, including hotel operators and large banking clients, have reportedly expressed interest.

However, an auction would introduce uncertainty over both timing and the final sale price, as bidders could factor in liabilities and other contractual conditions.

The trust’s freehold property on the Bangkok side of the Chao Phraya River is considered a high-potential asset, he noted.

GROREIT filed a lawsuit against Royal Orchid Hotel (ROH) on Oct 21 over alleged breaches of the lease agreement and failure to hand back the hotel premises. ROH has also sued GROREIT and ONEAM, although the latter said it had not yet received the statement of claim. (Story continues below)

The 726-room Royal Orchid Sheraton Hotel in Bangkok was developed in 1978 by Italian-Thai Development and acquired in 1985 by Royal Orchid Hotel (Thailand) Plc.

Buyback right ‘expired’

ONEAM and the trustee, MFC Asset Management, maintain that the original owner’s contractual buyback right has expired. ROH disputes this, but the matter has not yet been resolved by a court.

As ROH has yet to vacate the property, the trust has also sought eviction, damages and interim relief from the South Bangkok Civil Court. It has asked the court to require ROH to deposit 25 million baht per month, based on the former rental rate, pending resolution of the dispute.

The proposed sale is expected to proceed unless a court issues an asset-freezing or other interim order. The trust says the strong unitholder mandate reinforces its efforts to protect the interests of more than 1,600 investors.

GROREIT acquired the property from ROH in 2021 for 4.5 billion baht. Under the agreement, ROH was required to repurchase the land, buildings and related assets at the end of the fifth lease year on July 14, 2026, for 4.87 billion baht, excluding value-added tax.

However, the trust said ROH failed to complete the buyback before the contractual deadline, triggering the legal enforcement process and the search for a new investor.