Retail chain Uchumi is selling the building that hosts its flagship Ngong Hyper outlet in Nairobi as part of a debt settlement plan meant to put the troubled supermarket back on track.
The shop, which is located on Nairobi’s Ngong Road, is being sold to owners of the Thika Road Mall at a price of Sh2 billion, making it one of the biggest real estate deals this year.
Uchumi Ngong Hyper, which sits on 2.5 acres, is one of the retail chain’s prime real estate assets. The retailer has contracted the Nairobi law firm Coulson Harney to oversee the transaction.
Uchumi chief executive officer Julius Kipng’etich said the Thika Road Mall owners have also expressed interest in acquiring Uchumi’s 20-acre piece of land located in Nairobi’s Kasarani area at a price of Sh3 billion.
Mr Kipng’etich said Uchumi needs the money to pay suppliers given the limited options it has to raise funds.
“We have weighed the option and come to the conclusion that we cannot go back to shareholders for more money again having just come from a rights issue,” said Mr Kipng’etich, adding that the Ngong Hyper deal is being crafted as a sell-and-lease-back arrangement.
This means Uchumi will remain tenants occupying in the sizeable area of the Ngong Road mall.
“We have noticed that we have been disadvantaged by having operations in areas where some of our outlets have never made profits thereby negatively affecting our revenue,” said Mr Kipng’etich.
He named Tanzania and Uganda as locations where Uchumi outlets are running at a loss and face imminent closure.
Uchumi last week announced that it was closing three outlets in Uganda and that it is in the process of identifying non-profitable shops in Tanzania for possible closure.
Uchumi has written to the Capital Markets Authority (CMA seeking approval for the planned sale of assets and is awaiting the regulator’s response.
John Wambugu, the Uchumi company secretary, said the intended sale ‘had progressed well’ but declined to go into the details, citing buyer-seller confidentiality.
Thika Road Mall director Bharat Doshi on Monday said his team had met the Uchumi management to express interest in the two properties but insisted details of the deal were not immediately available.
“We have held talks with the management of Uchumi Supermarkets expressing interest in properties they have put up for sale but we have to wait for at least two weeks to disclose any details,” said Mr Doshi.
Thika Road Mall, which has more than 20 investments in Kenya, said the Uchumi assets on sale are not only valuable to it but would also be of interest to many potential investors.
Thika Road Mall has been financing its investments through debt from lenders, including Cooperative Bank, which loaned them unspecified amount to build its flagship investment located on the Nairobi-Thika Highway.
It is managed by Dunhill Consulting Limited, a company associated with TRM directors Mr Doshi and Nipool Shah.
The mall investor is seeking a presence in prime locations that would be attractive to corporations and renowned brands that are targeting big spenders.
Top-tier retailer Nakumatt is the anchor tenant at Thika Road Mall which also hosts Cooperative Bank, Barclays Bank, ABC bank, Diamond Trust Bank, NIC Bank, KCB, Standard Chartered Bank and the Commercial Bank of Africa.
Uchumi announced plans to sell its non-core assets three months ago shortly after it sacked its former chief executive Jonathan Ciano.
Mr Ciano was kicked out for gross misconduct and failure to pay suppliers, which negatively affected the retailer’s revenue base.
The Uchumi board also sacked two senior managers accusing them and Mr Ciano of failing to prevent the retailer from incurring losses and making decisions that could scale up its business operations into profitability.
Uchumi last year raised Sh896 million in a right issue whose proceeds Mr Ciano said was earmarked for refurbishment of the retail chain’s old outlets in Nairobi and to finance expansion.
The money was raised at a time Uchumi struggled to pay suppliers, a number of who had boycotted supplying the retailer.
The Uchumi board later appointed Mr Kipng’etich to head the retail chain and backed it up with a raid on Naivas Supermarket where it recruited Willy Kimani to the position of chief operating officer.
Uchumi has been facing stiff competition from rival retailers with strong financial muscles such as Nakumatt, Tuskys and Naivas.