1 February 2021

Newsletter
Key Contacts
THAILAND (COVID-19): PROPERTY OWNERS
MAY NOW SET BUY-BACK CONDITIONS FROM
REITS AND REITS MAY TEMPORARILY
OPERATE OTHER BUSINESSES APART FROM Tananan Thammakiat

RENTING OUT ASSETS

Introduction
One of the impacts of the COVID-19 pandemic has been that several real estate operators are facing difficulty in
relation to the liquidity of their businesses, especially hotel operators whose main source of income depends on
tourism. To support real estate operators, the Thai Securities and Exchange Commission (the “SEC”) has
introduced Real Estate Investment Trusts (“REITs”) with buy-back conditions. Details are contained in the
announcement of the Capital Market Supervisory Board No. TorJor. 3/2564 re: Issuance and Offers for Sale
regarding Units of REITs (No. 18) (“TorJor. 3/2564”) and the announcement of the Securities and Exchange Namita Tangpitukpaibul
Commission No. SorRor. 4/2564 re: Provisions relating to Particulars, Terms and Conditions in a Trust Instrument TEL+66-2-009-5000 Ext. 3204
[email protected]
of Real Estate Investment Trust (no. 12) (collectively the “Announcements”).
The Announcements mark an important change to how REITs may temporarily operate. This briefing will discuss
key points that investors and business operators should be aware of in relation to the new Announcements.
Announcement details
The Announcements, which became effective on 1 February 2021, introduce 2 key amendments as follows:
(1) Allowing REITs to invest in assets with a buy-back condition from property owners; and
(2) Allowing REITs to temporarily operate other businesses, such as hotels and hospitals, in addition to Suchunsinee Ngamchitsuksri
renting assets. TEL +66-2-009-5000 Ext. 3204
[email protected]
REITs with buy-back conditions
The Announcements classifies two types of REITs with buy-back conditions These include the following:
(1) REITs with a buy-back obligation; and Chandler MHM Limited
36th Floor, Sathorn Square
(2) REITs with a buy-back option. Office Tower
98 North Sathorn Road
In this regard, the key requirements of each type are summarized in the table below. Silom, Bangrak, Bangkok 10500
Thailand
REITs with a Buy-Back Obligation REITs with a Buy-Back Option
www.chandlermhm.com
Buy-back A property owner has an obligation to buy assets A property owner has an option to buy
Condition back from REITs within a specific date and at the assets back from REITs within a specific
agreed price, as specified in the asset sale and date and at the agreed price, as specified
purchase agreement. in the asset sale and purchase agreement.
Investor (1) Offering to all types of investors; or Offering to only Institutional Investors or
(2) Offering to only Institutional Investors or High Net Worth Investors and must have
High Net Worth Investors and must have at at least 2 unitholders.
least 2 unitholders.
 Listing (1) In the case of offering to all types of Trust units must not be listed on the Stock
Requirement investors, trust units must be listed on the Exchange of Thailand.
Stock Exchange of Thailand.
(2) In the case of offering to only Institutional
Investors or High Net Worth Investors, Trust
units must not be listed on the Stock
Exchange of Thailand.
Trust Unit (1) In the case of offering to all types of Trust units can be transferred to only
Transfer investors, trust units can be transferred to Institutional Investors and High Net Worth
Restrictions any type of investor. Investors, except for cases of inheritance.
(2) In the case of offering to only Institutional
Investors or High Net Worth Investors, trust
units can be transferred to only Institutional
Investors and High Net Worth Investors,
except for cases of inheritance
Asset The value of the asset must be determined by the income approach and replacement cost
Valuation approach.
Asset Sale The property owner’s obligation to buy-back The property owner’s option to buy-back
and must be created in the form of an agreement, must be created in the form of an
Purchase containing at least the following topics: agreement, containing at least the
Agreement (1) Name of the property owner who has the following topics:
right to buy-back; (1) Name of the property owner who has
(2) Specific date that the property owner will the right to buy-back;
buy-back the asset; (2) Specific date that the property owner
(3) Specific buy-back price that must not have will buy-back the asset; and
any conditions that may affect the price; and (3) Specific buy-back price that must not
(4) Cross-default events which will affect a have any conditions that may affect
property owner’s ability to buy-back. the price.
Parties have an option to consider
whether to include cross-default events
which will affect a property owner’s
ability to buy-back in the agreement.
Property Property owners must be juristic persons and not Property owners must be juristic persons
Owner* subject to any restrictions to hold immovable and not subject to any restrictions to hold
assets under relevant laws. Such property immovable assets under relevant laws.
owners must comply with the following
conditions:
(1) Prepare a financial statement that is audited
by an auditor approved by the SEC; and
(2) Receive a credit rating from a credit rating
agency approved by the SEC.
Income REITs with buy-back conditions may also generate income by earning profits by selling back
the asset to the property owner.
Prospectus REIT Managers of REITs with buy-back conditions shall disclose the additional information in
the 69-REIT form, as follows:
(1) Summary of conditions to sell the assets back to the property owner;
(2) Information in relation to the past performance of the assets (if any);
(3) Information of the asset’s valuation by means of the income approach and replacement
cost approach;
(4) Analysis on returns and risks of having buy-back conditions;
(5) Sensitivity analysis;
(6) Estimated asset’s maintenance cost and fund reserve amounts for such maintenance; and
(7) Other necessary information (if any).
*“Property Owner” means the owner of the asset who is selling the asset to the REITs including the same group of persons
of such Property Owner.
The SEC provides some relaxation to REIT Managers who can provide suitable and sufficient mechanisms or
policies to prevent conflicts of interest, by allowing them to manage more than one REIT with the same type of
asset.
Relaxation on operation of REITs
REITs are generally permitted to generate income only by renting out immovable assets and must not operate
other businesses. However, the Announcements grant exemptions to such limitations. Pursuant to TorJor.
3/2564, REITs may temporarily operate other businesses by themselves, such as hotels or hospitals, under the
condition that there is a change of lessee or the process of seeking a new lessee is ongoing. As such, prior to
such operation, REITs are required to disclose the cause of change of the lessee and disclose the REITs’ operating
procedures while seeking a new lessee. The REIT must provide updates every 6 months.
It is important to note that businesses that are to be operated by lessees of REITs are likely to require certain
operating licenses under the relevant laws and there are likely to be several conditions, requirements, obligations
and liabilities that are attached to those licenses. Trustees and REIT managers of the REITs should carefully
consider relevant regulations prior to such licensed business operations.
Conclusion
As a result of ongoing economic struggles caused by the pandemic, the SEC has relaxed certain conditions and
limitations for REIT business operators. The easing of prohibitions and relaxations offered under the
Announcement may offer some new opportunities for investors and allow more opportunities for existing REITs
in the market.
If you would like to discuss the issues raised in this article further or related issues, please contact the authors
listed in the right-hand column.

This publication is intended to highlight an overview of key issues for ease of understanding, and not for the provision of legal advice. If you have any questions about this publication, please contact your regular contact
persons at Mori Hamada & Matsumoto or Chandler MHM Limited. If you should have any inquiries about the publications, or would like more information about Chandler MHM Limited, please contact [email protected].