SHREIT, the Thai hospitality real estate investment trust, has announced that it plans to sell its two hotel properties in Ho Chi Minh City, the IBIS Saigon Hotel, a 3-star rated hotel and the 4-star rated Capri by Frasers hotel. Both hotels are located in HCMC’s District 7 area.
According to the minutes of SHREIT’s recent extraordinary general shareholders' meeting, Deepong Sahachartsiri, CFO of SHREIT said that the global COVID-19 pandemic had seriously affected the revenue, financial situation, and the business performance of SHREIT.
SHREIT says that is asking for $14.7 million USD for the IBIS Saigon South Hotel and $23.7 million USD for the Capri by Frasers property. The company does not expect one international or domestic investor to buy both properties, but expects that the sales will be to two independent entities.
Sahachartsiri said at the shareholders meeting that SHREIT’s invested hotels are generating significant operating losses and accruing expenses and liabilities at unsustainable rates. He added that several of the hotels that that company has invested in are operating with limited working capital reserves and may not be able to fund operations in the near term.
In also noted that the hospitality market in Indonesia and Vietnam has materially deteriorated for the business traveller and long-term corporate markets that both hotels serve.
Both the IBIS South Saigon and Capri by Frasers properties are located close to the Saigon Exhibition and Convention Center and their businesses had been built on international visitors who were attending conferences at SECC.
Because of the Covid-19 pandemic, over 90% of conferences scheduled at SECC between March and September were cancelled, with the majority rescheduling for 2021 when the Covid-19 pandemic is expected to be under control.
Reflecting this reality, both the IBIS and Frasers properties have reported occupancy rates of only 10 ~ 20% during the March ~ September period.
SHREIT hopes that the sale of the two hotels will help it to solve its immediate financial difficulties and weather the Covid-19 pandemic. The company said that it plans to use the proceeds to pay off its outstanding debts and expenses.
While SHREIT believes it will be relatively easy to sell the two properties, several real estate consultants in HCMC have predicated that the process will take longer than SHREIT is planning, and that it will receive less money than it’s asking for.
One real estate executive said, “International hotel groups are similar to SHREIT and putting the acquisition of new properties on hold, while domestic investors and hotel groups believe that the longer they wait to make a commitment, the lower the price will be. They want to see whether the Vietnam government will allow for more foreign visitors to enter the country this year, or whether restrictions will remain in place into 2021.”
He adds that, “The difficulty in selling these properties is their location, in the city’s suburb of District 7, which is 30 ~ 45 minutes from District 1, depending upon traffic, and 1-hour from the airport. Unless someone is visiting SECC for an event, there really is no reason to stay in District 7.”