Supermarket MD reveals bitter battle over 20yr lease
Construction of additional floors at the Hazina Trade Centre or Hazina Towers, which houses Nakumatt Lifestyle, started in December 2013. PHOTO | FILE
What you need to know:
Nakumatt's MD told the National Assembly Public Investments Committee (PIC) that the supermarket chain has moved to court seeking orders against attempts by NSSF to force the termination of the 20-year lease agreement it signed with public pension provider.
Problems arose in 2011 when NSSF indicated interest to redevelop the leased premises to 28 floors.
The construction of additional floors at Hazina Trade Centre on Nairobi’s Monrovia Street has cost Nakumatt Holdings Sh1.62 billion in lost business so far, the chain’s managing director has claimed.
The tower, which is owned by the National Social Security Fund (NSSF), is home to Nakumatt Lifestyle, which has seen a drop in traffic since building work began.
The works have also led to a sub-tenant exodus and sparked a dispute over the supermarket’s lease that could see it kicked out from the prime location.
Atul Shah, Nakumatt's managing director, on Tuesday told the National Assembly Public Investments Committee (PIC) that the supermarket chain has moved to court seeking orders against attempts by NSSF to force the termination of the 20-year lease agreement it signed with public pension provider.
NSSF hired China Jiangxi to build a 39-storey building incorporating the four floors that house Nakumatt. Mr Shah, who was accompanied by lawyer Manases Mwangi, says work began without NSSF involving them in negotiations over security.
“There was commotion at the beginning and customers thought Nakumatt had closed,” Mr Mwangi told the committee, chaired by Eldas MP Adan Keynan.
Wundanyi MP Thomas Mwadegu demanded that Nakumatt corroborate the alleged loss figures by presenting income tax returns.
Mr Atul said the loss was as a result of tenants that the supermarket chain had sublet the premises to moving out. Some sued Nakumatt for the lost lease period.
“We continue to incur losses. We have presented documents in court on the quantified loss, which we will provide this committee,” he said.
“Our greatest concern is the manner in which NSSF has (handled) Nakumatt. We requested they terminate the lease but they refused. They want Nakumatt (Lifestyle) to run down until it is closed or force us to terminate the lease. Government institutions should not mistreat private investors in their premises,” Mr Shah said.
Kiminini MP Chris Wamalwa said there was need for NSSF to indemnify loss of business by Nakumatt as part of conditions issued by the county government.
“Can you document that those who closed the sublet shops was as a result of construction or they had no business?” he asked.
“We don’t want you to take advantage of compensation clause in the lease agreement to demand Sh1.6 billion within a period of one year.”
Mr Shah responded saying Nakumatt would present to the committee a separate report on the sub-tenants’ exits.
The Nakumatt boss added that the construction by NSSF is illegal as it lacks approvals from the Nairobi County government and the National Environmental Management Authority (Nema).
Nakumatt said it is seeking damages and an injunction to stop construction as well as further wastage of the building.
Mr Mwangi said the company moved to court in 2014 to protect its leasehold for the building that it entered into agreement with NSSF on August 12, 2003.
“Nakumatt was approached by NSFF to lease out the entire premises. They agreed with NSSF to take over as single tenant. Even the space that Nakumatt didn’t want to take over, we agreed to sublease to eateries and collect money and pay a single cheque to NSSF for a period of 20 years,” Mr Mwangi said.
He said problems arose in 2011 when NSSF indicated interest to redevelop the leased premises to 28 floors.
“Nakumatt Holdings was not involved in any negotiations. Proposals were being made to redevelop the building first to 28 floors and then to 36 floors. It was then proposed to develop the building up to 39 floors,” he said.
He accused NSSF of not cooperating with the tenants to help in security arrangement during construction.
“We intended to ensure that the project is managed properly to ensure safety in construction. NSSF and Nakumatt found it difficult to sit down over the project. We wrote to complain about the construction and safety standards. NSSF refused to sit down and agree on the issues, including parking.”
Mr Mwangi said NSSF refused to provide Nakumatt with a Nema report saying the economic activities in the mall had been impacted by the construction.
“There has been reduced number of shoppers, reduced parking space and customers. There are serious traffic jams on Koinange Street and Loita Street that spills over to University Way. Security at the site is poorly managed and Nakumatt has no control. We risk outbreaks of communicable diseases,” Mwangi said.
He said NSSF had refused to implement recommendations by the director of occupation safety and health office at Nairobi County and failed to comply with Governor Evans Kidero's directive that demanded compliance with safety standards.
Mr Keynan said Governor Kidero and his team will be invited to shed light on the matter as well as Nema officials.
