The Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust (SHREIT) began trading yesterday on the Stock Exchange of Thailand in wobbly fashion as it sought to raise cash for increasing Asean asset holdings by US$100-200 million (3.3-6.6 billion baht) a year.
SHREIT opened at 9.70 baht, lower than the initial public offering (IPO) price of 10 baht a share, as retail investors opted to invest in common stocks during a time of bullish market sentiment, said Chavinda Hanratanakool, chief executive of Krung Thai Asset Management.
SHREIT shares closed the session at 9.35 baht, down 65 satang or 6.5% from the IPO price, in trade worth 79 million baht.
A REIT is a preferred investment choice during bearish times or when financial volatility is high, as REITs usually generate sustainable returns in the long run.
SHREIT enables investment in a diversified portfolio of high-quality hotels in Asean that cater to specific groups of tourists, businessmen and local consumers. Targeted return in the first year is 7.67-7.72%.
Patan Somburanasin, managing director of Strategic Property Investors Co Ltd (SPI), said SHREIT has invested in three Asean hotels that are high-quality properties run by Accor Hotels and Frasers Hospitality.
Strong regional fundamentals will further support the properties' revenue growth, Mr Patan said.
He said the occupancy rate for the three asset hotels in the fund is 60-80% a year. Returns are expected to be stable throughout the years relative to Thai hotels because the latter's revenue fluctuates with high competition in room prices.
SHREIT will continue investing in Asean properties in the first 3-5 years with a focus on property investment in Vietnam and Indonesia, where revenue growth is higher than for Thai properties, Mr Patan said.
Vietnam and Indonesia have annual economic growth rates of 7-10%, compared with Thailand's projected 4.2% next year.
SHREIT will invest in new assets to the tune of $100-200 million a year. The fund plans to increase capital for new investments each year during the first three years.
"We are confident that SHREIT will attract investment after the fund reports its first-half performance next year," Mr Patan said.
SPI executive director James Lim said SHREIT's initial assets include extendable freehold and leasehold rights in three regional hotels ranging from three to five stars: the Pullman Jakarta Central Park in Indonesia, and the Capri by Fraser and Ibis Saigon South in Vietnam.
These three hotels are properties catering to different target groups, Mr Lim said. For instance, the Indonesian hotel will benefit from a domestic clientele of tourists and consumers with high purchasing power, as well as a growing number of foreign visitors, helping to generate stable revenue and cash flow.
The two hotels in Vietnam, meanwhile, are benefiting from that country's strong economic growth, attracting foreign businessmen, investors and tourists, he said.
Veena Lertnimitr, executive vice-president of the primary distribution division at Siam Commercial Bank, the fund's financial adviser and lead underwriter, said all three SHREIT properties are quality foreign hotels in important economic zones with strong growth potential.