KCB Group has seized Mombasa’s luxury property English Point Marina and placed Pearl Beach Hotels, the real estate firm that owns it, under statutory management over a Sh5.2 billion debt.
Pearl Beach Hotels has been struggling to meet its obligations to the bank over the years.
A source with direct knowledge of the matter at the Business Registration Services (BRS) confirmed that the lender had taken over the property on Tuesday.
“I can confirm that KCB bank has taken over English Point today,” the source said, adding that the lender has appointed a receiver-manager to run the asset.
English Point Marina joins the high-value properties that have fallen in the hands of lenders after their developers defaulted.
They include Nairobi’s DusitD2, which is currently claimed by I&M Bank, with other creditors seeking to take ownership of the property complex.
KCB’s action to take over English Point Marina came after the bank tried several times to restructure the loan but the owners were still unable to meet the payments, the source said.
The receiver-manager, Kamal Bhatt, is expected to sell part or all of the property with an aim of raising enough funds to settle the amounts owed to KCB. Other creditors may also get something once the bank’s claims are paid.
Lenders are still allowed to appoint receiver managers in loan contracts that existed before the commencement of the Insolvency Act of 2015, which subsequently ushered in an administration that prioritises first salvaging a troubled firm before the sale of assets is considered.
“The administrative receiver is tasked with the duty to realise enough of the company’s assets to pay the debenture holder and where possible, other creditors too. The appointment of an administrative receiver automatically ends at the end of 12 months from and including the date on which it took effect,” BRS says on its website.
KCB has begun conducting an audit of buyers of the units and their status of servicing their purchases.
English Point Marina is owned by Amin Kanji, his wife Leila, brother Alnoor, sister-in-law Nafisa and Nazir Jinnah. The luxury property is located by the harbour, and consists of 96 apartments, eight penthouses and a 26-room hotel.
It is one of the few private projects granted the Vision 2030 Private Sector Flagship status.
The property has been sold to several people and the source said those who have purchased units will not be affected by the KCB takeover.
“KCB will conduct an audit of those who have bought units. Those who have paid up will get their houses while those who are yet to complete payments will process the remainder under the bank. There is no cause for panic,” the source said.
Banks have been compelled to place companies under receivership to deal with mounting bad loans. The ratio of gross non-performing loans (NPLs) to gross loans stood at 14.1 percent in April 2022 compared to 14 percent in February.
The Central Bank of Kenya (CBK) said increases in NPLs were noted in the building and construction, manufacturing, trade and transport and communication sectors. These increases were attributable to specific challenges in the respective businesses, and banks have continued to make provisions for the NPLs.
It has emerged that a few major customers, such as the developers of English Point Marina, are the main cause of the rise in defaults. The large clients borrow billions of shillings, meaning that default by a few of them can result in a major rise in the NPLs.
KCB’s takeover of English Point Marina came after the developer fell out with buyers who claim they have not taken ownership of the houses they bought at a cost of Sh600 million.
High Court judge John Mativo recently allowed the Directorate of Criminal Investigations (DCI) to proceed with a probe of Pearl Beach Hotels, the developer, for alleged theft through fraudulent billing of apartment owners.
Justice Mativo in February dismissed a suit filed by Pearl Beach Hotels, seeking to stop the probe. His orders came as a group of 12 buyers pursued a civil suit against the property developer for locking them out of their apartments on account of disputed service charge bills.
In the civil suit, the buyers are challenging English Point Marina’s decision to deny them a chance to sublet their apartments.
The buyers claim that an internal memo ordered English Point Marina’s staffers to discriminate against black African homeowners by implementing strict rules to deny them access to the property.
Among the disgruntled buyers are Rockefeller Foundation Africa boss William Asiko, Sam Kairu and Booker Mbugua. Others are Susan Muigai, Kariuki Minju, Joseph Wanjui, Solomon Bundi, James Kinuthia, Resilient Investments, Everywhere Investments and Silverline Investments.
The disgruntled buyers say that despite paying the disputed service charges, electricity has been disconnected from some apartments as management refuses to account for money collected.
Some of the conditions set by management have also sparked the bitter fallout.
“For instance, the apartment owners are required to serve an earlier notice to the management before visiting their apartments, which is an absurd requirement,” John Khaminwa, the buyers’ lawyer, says in court papers.
“The management declined to allow the apartment owners’ servants access to their units for purposes of cleaning the units and keeping the same in a habitable condition in the absence of the owners.”
Dr Khaminwa adds that English Point Marina has blocked buyers from renting out their apartments, contrary to the purchase agreement in which the management undertook to assist in sub-letting in exchange for 30 percent of revenue collected.
The lawyer says that English Point Marina has been deliberately disabling security keys for apartment owners in a bid to frustrate their tenants and guests into opting for the hotel instead.
English Point Marina had filed a suit against the DCI seeking to halt investigations, arguing that the grounds of the probe are similar to those of the civil suit filed by the 12 buyers.
Justice Mativo held that the civil proceedings are purely intended to stop English Point Marina from denying buyers access to their apartments, while the criminal investigations focus on the disputed service charges.
Story updated to include the name of receiver-manager.