ONEAM, the REIT manager for GROREIT, is moving forward with the sale of a disputed hotel after the original owner, ROH, failed to meet a crucial buyback deadline. The five-year period for ROH to repurchase the property for 4.873 billion baht (excluding VAT) expired on Tuesday, triggering contractual procedures to protect the interests of GROREIT’s unitholders.
Disputed Hotel Ownership and Buyback Failure
According to Alongkorn Prathanrasnikorn, chief property and trust officer at ONEAM, the agreement stipulated that ROH was required to repurchase the hotel within five years of its acquisition by GROREIT. As ROH did not make the payment by the deadline, ONEAM, in conjunction with MFC Asset Management (the trustee for GROREIT), has initiated the process to reclaim the hotel.
ROH has been granted a 30-day period to return possession of the hotel to the trust. Should the company fail to comply, ONEAM has stated its intention to pursue legal action for breach of contract. This move signifies a significant development in the ownership dispute, placing the hotel’s future under the trust’s control.
Path to Auction and Investor Returns
Following the expiration of the 30-day period, the trust plans to convene a meeting of its unitholders. The primary agenda item will be seeking approval to auction the hotel assets. The proceeds generated from this auction are slated for distribution to the investors, providing a clear pathway for them to recoup their investments.
ONEAM chief executive Pote Harinasuta expressed confidence that the auction would attract a diverse range of bidders. He noted that several domestic and international investors have shown considerable interest in acquiring the property over the past five to six months. This suggests a strong market appetite for the hotel, even amidst the current ownership complexities.
Mr. Harinasuta explained that interested parties were initially directed to negotiate with the original owner, ROH, due to the fund agreement’s requirement for ROH to exercise its buyback right first. ROH had a five-year window from the trust’s establishment to secure financing for the repurchase. Despite repeated reminders from the fund about the approaching deadline, ROH was ultimately unable to complete the purchase.
Current Ownership and Future Management
Under the terms of the contract, ownership of the hotel now rests entirely with the trust. If ROH wishes to regain ownership, it will need to participate in the upcoming auction process, competing on the same terms as all other potential bidders. This effectively removes ROH’s preferential buyback status.
The trust has formally notified Starwood, the operator of the Sheraton hotel brand, to assume management of the hotel on its behalf once the asset transfer is finalized. ONEAM anticipates that the entire process, from possession transfer to operational handover, could be completed within the current year. However, this timeline is preliminary and contingent upon the successful transfer of possession.
Hotel Acquisition and Financing Details
The trust originally acquired the hotel in 2021 for approximately 4.5 billion baht. The acquisition was financed through a combination of a 1.35-billion-baht loan from the Government Savings Bank (GSB) and roughly 3.15 billion baht raised from public investors. During the period of the buyback arrangement, the hotel has continued to operate, with the trust entitled to receive all income generated under applicable agreements.
Negotiations and Payment Structure Disagreements
Details emerged from an online meeting held on July 2, involving representatives from ROH, ONEAM, MFC, GSB, and prospective lenders introduced by ROH. During this meeting, potential financiers sought clarity on the payment and asset transfer processes before committing to provide financing for ROH’s planned buyback.
A key point of discussion was the existing mortgage on the hotel held by GSB. The loan needed to be repaid before the mortgage could be released, allowing for the ownership transfer back to ROH. GSB indicated that payment via cashier’s cheque could cause settlement delays due to confirmation and clearing procedures, potentially hindering same-day ownership transfers.
Prospective lenders proposed a split payment structure: one transfer directly to GSB to settle the outstanding loan, and another to GROREIT via Thailand’s Bahtnet payment system. Both GSB and GROREIT reportedly did not object to this proposed structure. Subsequently, ROH requested detailed payment instructions from MFC, which were provided in a letter on July 8.
ROH’s Stance and Financing Confirmation
Despite these discussions, ROH failed to complete the buyback by the July 14 deadline, leading to the current legal enforcement process. ROH managing director Vitavas Vibhagool has maintained that the company has no intention of abandoning the asset repurchase due to funding issues. He asserted to Thansettakij that the company is financially prepared, with financing already approved and agreements finalized by Singapore-based private credit investment manager OCP Asia.
This facility is valued at US$187 million (approximately 5.6-5.7 billion baht) and was intended for the asset repurchase, with an additional 500 million baht allocated for hotel renovations and working capital. Mr. Vibhagool attributed the transaction’s failure to finalize on time to disagreements over the payment structure.
He explained that MFC’s request for ROH to transfer payment through the Bahtnet system *before* the fund proceeded with redeeming title deeds and completing other asset handover procedures was unacceptable to ROH’s financiers. This arrangement, he argued, would expose lenders to undue risk by requiring funds to be transferred prior to asset delivery.
Mr. Vibhagool emphasized that the contract clearly stipulated a “same-time” transaction, where payment and title deed transfer occur simultaneously. He stated this structure is standard practice in property transactions, offering protection and certainty for all parties involved, typically completed at the Land Department through the concurrent exchange of funds and ownership documents.
Conclusion: The Road Ahead
With ROH’s buyback option expired and legal proceedings initiated, the focus now shifts to the unitholder meeting and the subsequent auction of the hotel. ONEAM’s confidence in attracting multiple bidders suggests a potentially competitive sale process. The successful auction and distribution of proceeds are expected to provide a resolution for GROREIT’s investors, while Starwood prepares to potentially take over hotel management. The situation highlights the complexities of real estate financing and contractual obligations, particularly when large sums and multiple stakeholders are involved.
