Companies

Tatu City rocked by shareholder wars

tatu

An artist’s impression of the Sh200 billion real estate project, dubbed Tatu City, which will be located on 1,000 hectares of land in Kiambu County, behind Kenyatta University. It is currently occupied by coffee plantations. Photo/COURTESY

Moscow-based investment bank, Renaissance Capital’s quest to firm its grip on Nairobi’s Sh240 billion real estate project dubbed Tatu City has sparked a vicious boardroom battle that has now spilled over to the courts, casting dark clouds over what promises to be Kenya’s single largest investment plan.

Steve Mwagiru, a minority shareholder, has moved to court seeking the dissolution of Tatu City Limited – the company that owns the project — on grounds that the majority shareholders led by Renaissance Capital have blocked him from the running of the firm.

Mr Mwagiru, a coffee dealer, wants the other shareholders to pay him about Sh11 billion for his 14.5 per cent stake in the project or have the company closed down, according to court documents seen by the Business Daily.

Renaissance Capital had offered Mr Mwagiru 2,768 acres of land in Ruiru, which they jointly owned, for his stake but the coffee dealer has rejected it, terming it too low.

Mr Mwagiru’s partners in Tatu City have firmly responded to his court action, sparking a fight that promises to unveil the company’s jealously guarded secrets – including the people bankrolling it.

Renaissance Capital has a 50 per cent stake in Tatu City while the remaining half is in the hands of Vimal Shah, the chief executive of edible oil processor Bidco, former Central Bank governor Nahashon Nyaga and Mr Mwagiru.

“The first petitioner, Stephen Mbugua Mwagiru, who at all material times has been a director or de-facto director of the company, has been illegally excluded from taking part in the management of the company,” says the court documents filed at the Milimani Commercial Courts on October 8.

Mr Mwagiru has intensified the pressure on his fellow shareholders with a claim that one of the directors has threatened to harm him through the Russian Mafia unless he stops demanding his rights as a shareholder and director.

The case will be heard on December 17 — in what could throw the project schedule off the track should the courts halt it.

Tatu City project seeks to use private capital to construct a whole new city of 62,000 residents, who will live in a well planned environment of manicured homes, office blocks, shopping malls and industrial parks on 1,000 hectares in Kiambu County, behind Kenyatta University.

The project is divided into 10 phases, starting with the setting up of basic infrastructure in the first quarter of next year. 

People familiar with the project said shareholder disagreements and the court case was behind President Kibaki’s last-minute decision to skip the official launch of the project on October 28 despite public pronouncements he would be the chief guest. 

Renaissance Capital appears to hold that the project cannot move with Mr Mwagiru on board because he lacks the cash and network of contacts in the business and political scene that is critical for its execution.

“We had a call with the other Kenyan partners and we agreed that an amicable separation makes sense,” said an email from Chris Baxter, the CEO of Renaissance Capital to Mr Mwagiru.

“We understand that the net equity interest of you and your group (the S Group) is approximately 10 per cent. The simplest solution would be for the S Group to take a single title with the value of 10 per cent and the title which appears to best fit this proposal is the 1,184 Ruera title,” added Mr Baxter in the email seen by the Business Daily.

But Mr Mwagiru has termed the offer too little, arguing that the change of the land use from agricultural to real estate and future earnings that will accrue to the Tatu City shareholders had increased the value of the land, significantly making it impossible for him to take the offer of 2,700 Ruera firm for his stake in the real estate firm.

“Comprehensive financial projections have been prepared which show the value of the company’s assets to be $982, 000, 000 (Sh78.5 billion),” Mr Mwagiru says.

The estimate is based on the vibrancy of Kenya’s property market that has seen the prices of apartments in Nairobi’s middle-income areas more than double in the five years.

The trend is expected to hold underlining real estate as an asset class of premium returns relative to equities, bonds and bank deposits.

A deep look at planned workings of the private city indicate that Renaissance Capital and its local partners plan to subdivide the land into small plots and resell it to developers complete with the earmarked design for each.

Shareholders in the Tatu City project will also earn annual lease fees from the private developers who are expected to pump billions of shillings in homes, office blocks and shopping malls in the Nairobi suburb.

Renaissance Capital and Mr Mwagiru along with other investors came together around 2008 with the intention of going big in the agricultural plantation business dealing in coffee, flax, cotton, barley and wheat.

Under the deal, Renaissance Capital offered cash to buy land with Mr Mwagiru and his partners —which pushed their total land holding to 11,040 acres spread across Ruiru, Thika and Juja.

In December, the group jointly acquired a 62 per cent stake in Eaagads — a Nairobi Stock Exchange (NSE) listed coffee grower. 

Trouble began when some of the partners decided to convert part of the agricultural land to real estate in what is now shaping up to be Tatu City.

With the project requiring billions of shillings and critical contacts in the investment and political arenas, it was felt that Mr Mwagiru would add little value and that he and his partners stood to reap outsized gains despite making little input to the real estate project.

On Thursday, Mr Shah refused to comment on the dispute, but remained upbeat that the project would take off.

“The question is not who owns Tatu City today but who will own it in 12 months,” he said when asked about the row.

Under the deal, Renaissance Capital and its local shareholders alongside others yet to be identified investors will put up basic infrastructure on the 1000 hectares then tap investors who will buy plots and develop them under strict specifications.

They will basically act as Tatu City’s local authority, controlling developments in the area and charging property owners lease fees in what is expected to earn them huge returns.

“Our intention is to create Tatu City Council that will see investors pay the shareholders for the land and annual leases,” said Mr Shah in an interview last Thursday.

The project is in its conception and its magnitude is comparable to South Africa’s Sandton City, the leafy and exclusive high-end of market piece of real estate that was built on the outskirts of Johannesburg by the apartheid government.

But unlike Sandton, which was mainly driven by the government, Tatu is a purely private sector-driven plan that is 50 per cent owned by private money.

The project is located in Kiambu County’s coffee plantations, which are close to the UN offices in Nairobi and the leafy suburbs of Runda and Muthaiga , a clear signal of the intention of its creators to target the cream of Kenya’s real estate buyers that includes international civil servants, top businessmen and civil servants whose numbers are expected to rise significantly in the next two decades.

[email protected]