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Fight over Nakumatt Sh2b estate intensifies

BUSINESS NEWS
By Frankline Sunday | February 24th 2021
The main entrance to collapsed supermarket chain Nakumatt's ex-head office off Mombasa Road in Nairobi

One of the banks seeking to auction a Sh2 billion property belonging to collapsed retailer Nakumatt over unpaid loans, has been cited for flouting the law.

The High Court has ruled that Bank of Africa failed to comply with the law by not serving other creditors with appropriate notice before initiating the process of the sale of Nakumatt’s former head office in Nairobi’s Industrial Area. 

In a ruling delivered last week, High Court Judge Alfred Mabeya said the lender can, however, still proceed with the sale after serving the other lenders involved in the case with a notice of sale. 

“I am alive to the fact that the bank deposed that the sale is in conjunction with the other chargees,” explained Judge Mabeya in his ruling.

Bank of Africa won the claim to the property in court last year, seeking to sell it and recover a Sh700 million loan advanced to the collapsed supermarket chain.

The other lenders charged to the property include Stanchart, KCB and Diamond Trust Bank. Collectively, the banks are owed at least Sh8 billion but have failed to agree on the sale of the property for over a year, arguing over sharing of the monies.

The property’s Sh2 billion valuation is estimated to have fallen owing to a property slump in recent years and the negative impact of the Covid-19 pandemic.

In July 2020, Bank of Africa instructed Igare Auctioneers to sell the property within 45 days unless former Nakumatt Holdings Managing Director Atul Shah could come up with Sh467.9 million plus interest.  

Shah, through his company, Collogne Investments Ltd, filed an injunction to block the sale, saying the company had planned its own auction of the property the following month and that a written offer had even been presented to Nakumatt’s administrator.

In court papers, he tried to block the sale by Bank of Africa, arguing that other creditors stand to lose their security.

According to Keysian Auctioneers, the property, which has a 99-year leasehold, offers an annual “revisable” rent of Sh220,000.

Justice Mabeya queried the nature of the collateral arrangement among the four lenders, saying it defeated logic how they extended facilities amounting to over Sh4 billion on a single security whose value is less than Sh2 billion.

“That loss should lie where it has fallen,” he said.

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