Key points
- A contractual dispute involving the ownership of one of Bangkok’s best-known luxury hotels has escalated after One Asset Management Company Limited (ONEAM), the real estate investment trust manager responsible for overseeing the Grand Royal Orchid Hospitality Real Estate Investment Trust with Buy-Back Condition (GROREIT), initiated a series of measures following the failure of a Bt4.
- This Thailand Hotel News report examines how the REIT manager has now moved to safeguard the trust after Royal Orchid Hotel (Thailand) Plc and GROREIT failed to complete the scheduled transfer of ownership of the Royal Orchid Sheraton Riverside Bangkok Hotel on July 14, creating uncertainty over ownership, hotel management and the eventual winding up of the trust.
- According to information filed with the Stock Exchange of Thailand, Royal Orchid Hotel has continued operating the property as lessee while also holding the contractual obligation to repurchase the hotel assets at the end of the fifth lease year under a mandatory buy-back provision.
Thailand Hotel News: A contractual dispute involving the ownership of one of Bangkok’s best-known luxury hotels has escalated after One Asset Management Company Limited (ONEAM), the real estate investment trust manager responsible for overseeing the Grand Royal Orchid Hospitality Real Estate Investment Trust with Buy-Back Condition (GROREIT), initiated a series of measures following the failure of a Bt4.873-billion mandatory asset buy-back to meet its contractual deadline.
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ONEAM serves as the manager of GROREIT and is responsible for protecting the interests of the trust and its unitholders by administering the trust in accordance with Thailand’s securities regulations and the trust deed. Working alongside trustee MFC Asset Management, ONEAM oversees the trust’s assets and ensures contractual obligations relating to the investment are carried out. This Thailand Hotel News report examines how the REIT manager has now moved to safeguard the trust after Royal Orchid Hotel (Thailand) Plc and GROREIT failed to complete the scheduled transfer of ownership of the Royal Orchid Sheraton Riverside Bangkok Hotel on July 14, creating uncertainty over ownership, hotel management and the eventual winding up of the trust.
Sale-And-Leaseback Structure Reaches Its Final Stage
The dispute centers on a sale-and-leaseback transaction that was established several years ago involving the Royal Orchid Sheraton Hotel & Towers project.
Under the arrangement, GROREIT acquired the freehold rights to both the immovable and movable assets associated with the hotel from Royal Orchid Hotel. Following the sale, Royal Orchid Hotel immediately leased the property back, allowing it to continue operating the internationally branded five-star hotel situated along Bangkok’s Chao Phraya River.
According to information filed with the Stock Exchange of Thailand, Royal Orchid Hotel has continued operating the property as lessee while also holding the contractual obligation to repurchase the hotel assets at the end of the fifth lease year under a mandatory buy-back provision.
ONEAM has acted throughout the investment period as manager of GROREIT, while MFC Asset Management has served as trustee responsible for safeguarding the trust’s assets and ensuring the transaction complies with applicable regulations.
Under the original agreement, Royal Orchid Hotel was required to repurchase the assets on July 14 for Bt4.873 billion, excluding value-added tax, after which GROREIT intended to repay outstanding borrowings, distribute the remaining proceeds to unitholders and proceed with the trust’s dissolution in accordance with Securities and Exchange Commission regulations.
ONEAM Says Buy-Back Was Not Completed
According to ONEAM, the mandatory buy-back was not completed on the contractual deadline because ownership was not transferred at the relevant land office as required under the agreement.
The REIT manager stated that Royal Orchid Hotel did not complete the repurchase process or formally accept the transfer of ownership on July 14, effectively preventing GROREIT from executing its planned exit strategy.
As a result, the trust has been unable to begin repaying its outstanding loans, distributing remaining capital to investors or commencing its planned dissolution.
The missed deadline has also created uncertainty regarding the future ownership structure of the hotel and the management arrangements governing one of Bangkok’s landmark hospitality properties.
Trustee Announces Protective Measures
Following the unsuccessful transfer, ONEAM informed trustee MFC Asset Management of the circumstances and announced that several protective actions would be undertaken to safeguard the interests of GROREIT and its unitholders.
The trustee intends to issue Royal Orchid Hotel with a formal notice stating that the mandatory buy-back had not been completed and that, in its view, the lease governing Royal Orchid Hotel’s occupation of the property has expired.
Royal Orchid Hotel will be requested to cooperate with representatives from both the trustee and the REIT manager and comply with the relevant contractual provisions within 30 days of receiving the notice.
ONEAM also disclosed that MFC plans to notify Starwood Hotels & Resorts Worldwide (part of Marriott Hotels) of its position regarding the lease expiry.
According to the REIT manager, the trustee intends to make temporary arrangements with Starwood to continue managing hotel operations directly in order to ensure uninterrupted service for guests while the ownership dispute remains unresolved.
Separately, MFC plans to approach Government Savings Bank to negotiate an extension of GROREIT’s debt repayment schedule together with any necessary waivers or lender approvals required under the existing loan agreements.
ONEAM added that it and the trustee will jointly consider additional options regarding the future management of the property while continuing to protect the interests of GROREIT’s investors and comply with relevant Securities and Exchange Commission regulations.
Royal Orchid Hotel Disputes ONEAM’s Position
Royal Orchid Hotel has rejected the suggestion that it failed to honor its contractual obligations.
Instead, the company argues that the transaction could not be completed because MFC Asset Management communicated a payment procedure that Royal Orchid Hotel believes is inconsistent with the original sale and purchase agreement.
According to the company, it requested the trustee to amend what it considers to be a payment mechanism that does not comply with the contractual provisions before the transaction could proceed.
Royal Orchid Hotel also confirmed that an authorized representative attended the land office on July 14 specifically to explain the company’s objections to the proposed payment arrangements.
The company maintains there has never been any unwillingness or inability to repurchase the assets and insists there are no financial obstacles preventing completion of the transaction once the payment mechanism dispute has been resolved.
Royal Orchid Hotel further stated that it continues to regard itself as having authority to oversee and operate the hotel while discussions continue.
The company indicated that additional details regarding the differing contractual interpretations would be disclosed after the matter has been resolved in order to avoid unnecessary confusion among shareholders, investors and other stakeholders.
Ownership And Operational Control Remain in Dispute
Although both parties expect the Royal Orchid Sheraton Riverside Bangkok Hotel to continue operating normally, they fundamentally disagree over several key legal issues arising from the failed transaction.
ONEAM and trustee MFC Asset Management consider the July 14 contractual deadline to have passed without performance and have begun implementing measures intended to protect GROREIT, its lenders and its unitholders.
Royal Orchid Hotel, however, argues that the buy-back remains capable of completion because the disagreement concerns only the payment mechanism rather than the company’s commitment to repurchasing the assets.
The dispute has therefore expanded beyond ownership alone to include questions surrounding the status of the lease, authority over hotel management and the timing of GROREIT’s planned dissolution.
Until both parties reach a negotiated settlement or pursue further contractual or legal remedies, uncertainty is likely to continue over the future ownership of the Royal Orchid Sheraton Riverside Bangkok Hotel and the completion of one of Thailand’s largest hospitality-related REIT exit transactions. The outcome will be closely monitored by investors, lenders and the wider hospitality industry, as it may influence future sale-and-leaseback structures and mandatory buy-back arrangements involving hotel real estate investment trusts. For now, operations at the hotel are expected to continue while the contractual dispute unfolds, and for the latest on this saga, keep on logging to Thailand Hotel News.
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