B2.5bn private equity trust launched to target hotels in distress

B2.5bn private equity trust launched to target hotels in distress

An image provided in the press release announcement shows (from left) Natthapong Na Ranong, CEO of KTB Securities (Thailand) PCL, James A. Kaplan, CEO of Destination Capital PTE LTD, and Thotsaporn Pornvattanasirikul, REIT Trustee Department Director of MFC Asset Management Public Company Limited.

Bangkok-based private equity firm Destination Capital announced they had signed an agreement with KTB Securities (Thailand) Public Company Limited (KTBST SEC) and MFC Asset Management Public Company Limited (MFC) to capitalize and launch the “DESCAP 1 Private Equity Trust”.

The trust will acquire hotels in Thailand and target investor returns of up to 15% per year with a five- to seven-year holding period, explained the release.

Destination Capital “will source, acquire, reposition and asset manage hotels acquired by DESCAP 1 Private Equity Trust with KTBST SEC acting as Trust Settlor and Trust Manager and MFC as Trustee under this SEC regulated structure” Destination Capital CEO James A. Kaplan said.

“The investment strategy is to acquire urban and resort hotels and then renovate, reposition and rebrand to increase value of the properties in order to generate meaningful returns to investors utilizing the experience gained by Destination Group with its 24-year track record in Thailand of buying, managing, and selling hotels particularly during times of distress,” he added.

“We are pleased to play such an important role to support the rejuvenation of the Thai travel and tourism industry with the announcement of DESCAP 1 Private Equity Trust,” said Mr Kaplan.

“This trust will invest in strategic hospitality assets to facilitate re-employment and hotel re-openings to re-launch Thailand as a preferred global travel destination. This could not have been done without the support of our advisor and trust manager, KTBST SEC and MFC as trustee,” he added.

Mr Kaplan also noted that the DESCAP 1 Private Equity Trust will afford investors the opportunity to participate in the rebound of the Thai hotel and resort industry. 

“During [the] covid-19 pandemic, with tourism significantly affected, tourist arrivals collapsed from approximately 40 million visitors in 2019 to an estimated 7 million visitors in 2020 which represents most arrivals through March 2020. There will be a gradual rebound in 2021 provided there is a meaningful vaccine and flight schedules restart to pick up the anticipated demand,” said the release.

“The trust will acquire freehold hotels and resorts located in prime destinations and locations including Bangkok, Pattaya, Hua Hin, and Phuket, as these locations are expected to be the fastest rebounding destinations,” it added.

KTB Securities CEO Natthapong Na Ranong stated that the fund raising for the trust has two main target investor groups “including Institutional investors and High Net worth individuals who are interested to invest in the recovery of the Thai hotel industry by participating in the trust”.

“KTBST SEC will raise funds and act as trust manager to support this important initiative and we look forward to establishing additional trusts and investment vehicles going forward to recapitalize the tourism industry which is such an important part of the Thai economy,” he said.

The trust units which are subject to SEC regulation will be available to both foreign and domestic investors for subscription of the units in October with the target trust capitalization of B2.5 billion. The trust has a five-year investment period extendable subject to market conditions by two years targeting annual returns of up to 15%.

“KTBST SEC has received inquiries about the trust from fund management and securities firms to act as the selling agents, which is a validation that  investors see opportunity in the travel and tourism industry in Thailand through a regulated structure backed by the  proven track record of the asset manager,” the release noted.

Although private equity trusts are new in Thailand, they are common and widely accepted in other jurisdictions and serve as an easy and flexible way to invest in alternative asset classes with higher investor returns, it added.

 “Under the collaboration among KTBST SEC as the trust manager, MFC as trustee, and DC as the Asset Manager, DESCAP 1 Private Equity Trust will facilitate a needed financial boost for the hotel industry and serve as an alternative asset class within investor portfolios. I believe this as the opportunity for investors who seek an investment in the Thai tourism industry which offers a degree of flexibility with full accountability,” Mr Natthapong said.