Secret offshore firm buys stake in Fairview Hotel

A secret company registered in the British Virgin Islands will make a joint bid with private equity Actis in the Sh1 billion deal to buy Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers.

Filings at the Comesa Competition Commision shows the hotels will be bought by Actis and Jamison Valley Holdings indirectly through Ukarimu real estate funds.

The two buyers have formed a special purpose vehicle (SPV) listed in Mauritius called Msafiri Limited, which will own Ukarimu.

The filings do not indicate what stake each company will have in the SPV or the ownership details of Jamison, registered in the offshore tax haven of the British Virgin Islands.

“Jamison does not intend to disclose any additional information, including details of its structure to any third parties other than those contained in the Commission’s Merger Inquiry Notice No. 26 of 2021 dated 16th September 2021,” said Sandya Booluck, senior analyst, Mergers and Acquisitions, at Comesa Competition Commission.

In the said notice, Comesa only discloses that Jamison Valley Holdings Limited is a private limited company incorporated under the laws of the British Virgin Islands.

The three Kenyan hotels were put up for sale by their South African owner City Lodge Hotel Group in plans to exit East Africa after barely seven years of operation.

The Group also plans to sell Tanzania’s City Lodge Hotel in Dar es Salaam for Sh7.3 million to another real estate fund Faraja Limited, also owned by Actis.

The company says the East Africa units were loss-making to the tune of Sh2 billion as at the end of last year.

“The parties have submitted that Ukarimu has been incorporated by Msafiri Limited (“Msafiri”), a special purpose vehicle incorporated under the laws of Mauritius, by Actis Hospitality Mauritius Limited. Jamison will, prior to the transaction, acquire shares in Msafiri,” said Ms Booluck.

Ukarimu Limited and Faraja Limited are real estate funds under Actis.

City Lodge Hotel says that occupancy levels have been below expectations at Two Rivers while bookings in the Tanzanian unit have been sluggish, leaving only Fairview with a robust performance.

Fairview Hotel has 127 rooms, while City Lodge Hotel at Two Rivers has 171 and Town Lodge Upper Hill 84.

The South African owner has not, however, made a direct reference to sluggish business as the reason for selling the hotels, which will now leave its operations in South Africa, Botswana, Namibia and Mozambique.

It said the sale was prompted by the need to reduce debt levels and eliminate operating losses.

“The board of directors of City Lodge has previously communicated its desire to dispose of the company’s entire East African hotel portfolio together in order to reduce debt levels within the City Lodge Group, increase group liquidity and eliminate ongoing operating losses,” the firm said.

The offer comes at a time Covid-19 has ravaged the hospitality industry, mainly through hotel closures and booking cancellations.

Last year it plunged into Sh3.64 billion (R486.6 million) loss—the first in over seven years.

“The 2020 financial year was our most challenging operating year in the group’s 35-year history, mainly due to the lockdown protocols,” it said.

The British Virgin Islands, a tax haven, has proven to be one of the most attractive places in the world for establishing an offshore business.

Its tax laws have been designed to attract offshore companies, especially those whose real owners want to hide behind corporate veil using proxies such as accountants and legal firms.

Companies operating from secretive trusts and foundations in low-tax jurisdictions have recently attracted increased public attention after President Uhuru Kenyatta and his family were cited for secretly owned a network of offshore companies for decades.

The Kenyattas’ offshore investments, including a company with stocks and bonds worth $30m (Sh3.3 billion), were discovered among administrative paperwork from the archives of 14 law firms and service providers in Panama and the British Virgin Islands (BVI) and other tax havens.

The secret assets were uncovered by an investigation by the International Consortium of Investigative Journalists (ICIJ), Finance Uncovered, Africa Uncensored and other news organisations.