Kenya Forest Service is locked in a legal battle with a private equity firm Actis over land ownership in a spat that has derailed the construction of a Sh2 billion office block on Nairobi’s Ngong Road.
KFS reckons that the land set for the office block is protected and part of the Ngong Forest, prompting it to send guards on November 2 stopping the construction of the 15,000 square feet of office space that started on October and was to end in December this year.
Actis, which has raised Sh24 billion from wealthy investors for investments in Africa’s real estate, says it bought the land from Jockey Club of Kenya in 2010 for Sh200 million in a transaction it claims was sanctioned by the Ministry of Lands and the Nairobi City Council.
The dispute has its roots in colonial Kenya when the British government offered the Jockey Club land in Ngong Forest in exchange for property that is the present day Kariokor area in 1927 ahead of the plot being demarcated as a forestry zone in 1964.
The PE fund was intending to host banking halls, conference centre and retail zone, an expansion of the Nairobi Business Park that Actis launched in 2004, deepening its investment in Kenya’s lucrative real estate market.
But Actis is likely to miss this opportunity should the KFS convince the court that the land is a gazetted forest zone and that the equity fund has encroached on its property.
“The development was intended to be completed in 65 weeks and has currently halted with material and contracted employees waiting on the site incurring losses to the tune of Sh670, 000 per day and loss of potential real-estate investment,” said Nairobi Business Park Limited in court documents.
“The plaintiffs (Actis and the Nairobi Business Park Limited) obtained the requisite approvals and consents from the Ministry of Lands, City Council of Nairobi and the National Environment Management Authority (Nema).”
Thursday, Justice Erick Ogola set a hearing date for January 24 and directed KFS not to interfere with the disputed property for two weeks. The KFS guards have remained at the property since November 2.
Actis joins a number of foreign investors including Russia’s Renaissance Capital that are investing billions of shillings into real estate to ride a housing boom fuelled by a growing middle class.
Its interest on the disputed land began in year 2000 after Jockey Club obtained approvals from the commissioner of lands to subdivide the land and change its user to allow half of it be covered by shops, offices and residential accommodation.
This allowed the construction of the first phase of the Nairobi Business Park, where the Jockey Club was offered a minority stake in exchange for the land.
In 2002, the joint venture further subdivided the land and sold the contested portion to Actis for Sh200 million, setting the stage for the construction of the second phase of the Nairobi Business Park.
The expansion of the park is the last project for Actis’ Africa Real Estate 1, which raised Sh13 billion and was used to construct commercial properties in its six years of existence including the Junction Mall and the phase one of the Nairobi Business Park.
The PE fund has already raised the Sh24 billion under Actis Africa Real Estate 2 that will focus on retail and office development in east, west and southern Africa, excluding South Africa.
This will be used to build a Sh12.4 billion housing project in Kenya, dubbed Garden City, on a 32-acre piece of land along the Thika superhighway that is adjacent and previously owned by East Africa Breweries Limited.
The mall will include a 50,000 square metres retail mall, commercial premises, 500 homes, and a four-acre central park—the biggest in the region.
The mall will be bigger compared to Sarit Centre (30,000sq metres), Junction (26,000sq metres), and Westgate (30,000sq metres).