Two weeks ago the court also froze Kenya Railways assets countrywide, an order the corporation is contesting on the grounds that its operations would grind to a halt. It also argues that only three of its assets are the subject of the contract dispute. Photo/FILE
An investor is seeking Sh26 billion compensation from the Kenya Railways Corporation (KR) for breach of contract over a proposed Sh40 billion golf city project in Nairobi.
A Chinese company — Erdemann Property Group — won the 2009 tender to convert the current Railways Club golf course into a golf city with a five-star hotel on a 63-acre piece of land along Haile Selassie Avenue and Uhuru Highway.
However, a dispute between the company, Kenya Railways and trustees of the Kenya Railways Staff Retirement Benefit Scheme which co-owns the property, forced the developer to move to court for protection.
Consequently, Erdemann has obtained temporary court orders restraining the corporation from changing the status of the property until the dispute is determined.
Two weeks ago the court also froze Kenya Railways assets countrywide, an order the corporation is contesting on the grounds that its operations would grind to a halt. It also argues that only three of its assets are the subject of the contract dispute.
Mr Justice Mabeya will on Friday rule on whether the interim orders restraining the corporation from dealing with its properties should be lifted.
Erdemann managing director Ze Yun Yang said in court papers that the company won the tender to develop the golf city on three properties within the central business district on a Build Operate and Transfer basis.
One of the properties measuring 63 acres was to be located at the Railways Golf Club east of Haile Selassie Avenue and the other at the Railway Club west of Haile Selassie Avenue and bordering Uhuru Park. The project was to comprise a 100-room five star hotel, a 600-room four star hotel, a nine hole golf course and a golf club house with a modern leisure, business and shopping facilities.
There were also to be adequate parking facilities for nearly 2,000 vehicles and a metropolitan rail terminal connecting the facility to the Jomo Kenyatta International Airport and the rest of the city.
The development, however, has stalled over a dispute in which the investor is seeking Sh26 billion as special damages for breach of the contract.
Erdemann wants Kenya Railways to pay Sh191 million as special damages, Sh24.5 million consultancy and legal fees, Sh243 million tender preparation expenses and Sh25.5 billion for loss of appreciation in value of two parcels LR 209/8760 and L.R 209/11379.
The investor is also seeking a court order compelling Kenya Railways to transfer the parcel of land L.R 209/11953 to the developer for an equivalent of Sh1.76 billion.
Erdemann says its search on LR 209/8760 later found that the parcel had been sold to Greenfield Developers for Sh650 million and the title charged to a bank. Court papers indicate that the investor had agreed to meet the contractual investment of Sh40 billion within 72 months upon the execution of the agreement.
A proposed works programme tabled in court by Erdemann indicates that the golf city was to be developed in three phases with the first having 24 blocks of executive apartments at a cost of Sh10 billion.
The second phase worth Sh20 billion was to comprise a shopping mall and office block and five star hotels while the third was to cost Sh10 billion and be completed by December 2015.
Erdemann submitted that after winning the bid for the development of the three properties, Kenya Railways and its staff retirement benefit scheme declined to transfer the assets for work to begin.
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