Turkish clothing retailer LC Waikiki Retail Ke Ltd has blamed low sales and poor foot traffic for its decision to terminate a sublease agreement with Nova Holdings Ltd for a shop space within the Likoni Mall in Mombasa before the stipulated period has lapsed.
The retailer says its store at the Likoni Mall has experienced persistent low sales and poor foot traffic, which continued to decline through 2023 and 2024.
Through an affidavit of its finance and accounting manager, Moses Chege filed in court, LC Waikiki Retail Ke Ltd says, despite various marketing and operational initiatives, including periodic promotions and product realignments, the outlet consistently operated at a loss.
Mr Chege’s affidavit is in response to an application by Nova Holdings Ltd (landlord), which has sued the clothing retailer seeking a permanent injunction restraining it from prematurely terminating a sub-lease agreement between them before the permissible period for ending it.
LC Waikiki Retail Ke Ltd says having exhausted all reasonable avenues to sustain the business and meet its obligations, it issued a three-month notice of termination of lease effective July 1, with the lease terminating on September 30.
The High Court has issued temporary orders restraining the retailer from terminating the agreement.
Justice Wendy Micheni, sitting in Mombasa, also restrained the multinational from vacating the leased premises, which belong to Nova Holdings, associated with businessman Ashok Doshi.
Mr Chege, in his affidavit, says that in light of the continuous underperformance, the clothing retailer sought to engage Nova Holdings to explore possible interventions that could support business continuity while enabling it to meet its rental obligations.
Waikiki said they agreed to a 10 percent discount on rent. However, despite the efforts, the store’s performance deteriorated with losses persisting into 2025.
“A meeting was held between the parties after which an agreement was reached that the plaintiff (Nova Holdings Ltd) would grant the defendant a 10 percent discount on rent for a period of six months covering July to December 2024,” Mr Chege states.
LC Waikiki Retail Ke Ltd says that it followed through email correspondence with Nova Holdings Ltd, seeking to engage their (Nova Holdings Ltd) marketing personnel to actualize an earlier proposal to provide marketing space at no cost.
“The defendant intended to leverage this marketing space to increase visibility and drive foot traffic during the peak season to improve sales performance,” states Mr Chege, adding and that it has continued to meet its rental obligations within the limits of its operational capacity but remained under heavy financial strain.
It further says that on May 27, 2025, a meeting was held at the residence of Nova Holdings Ltd’s principal Mr Doshi, where it raised concerns about the continued unsustainability of the business and the need to explore restructuring options or an amicable exit, but no resolution was reached.
“The defendant duly communicated their intention to vacate the premises in good faith and in accordance with the terms of the lease; the plaintiff’s refusal to accept the lease does not invalidate or suspend the termination,” Mr Chege states.
LC Waikiki Retail Ke Ltd says that, having exercised its contractual right of termination upon financial hardship and in accordance with the lease, it cannot be compelled to continue a commercially untenable tenancy merely because Nova Holdings Ltd declined to let the premises to others.
“The plaintiffs’ application is therefore misconceived as, should the injunctive orders remain in force, it would compel continued payment of rent and service charge, which would prejudice its interests,” states Mr Chege.
In its application, Nova Holdings Ltd, which claims that LC Waikiki Retail Ke Ltd has commenced the process of vacating Likoni Mall, and if allowed to vacate the premises, the substratum of the case will be spent.
Through lawyer Willis Oluga, Nova Holdings Ltd also argues that the defendant (LC Waikiki Retail Ke Ltd) has commenced its exit from the premises and is currently carting away its goods and items.
“The plaintiff (Nova Holdings Ltd) is apprehensive that if the defendant carts away all its goods and items, there will be nothing left for it (plaintiff) to auction in recovery of any amount that this court may award, thereby defeating the plaintiff's claim,” the application states in part.
In the main case, Nova Holdings Ltd claims a total of Sh40.4 million on account of rent and VAT, and Sh5.4 million in respect of service charge and VAT.
The plaintiff is also seeking a declaration that the defendant is in breach of the sublease agreement dated January 24, 2022, and registered on April 22, 2022, between the two parties.
Nova Holdings Ltd argues that on or January 24, 2022, it entered into a sub-lease agreement with the defendant pursuant to which it leased out shops together with adjoining passage on the first floor of Likoni Mall for 15 years, effective June 3, 2022.
The plaintiff also argues that under the sub-lease, LC Waikiki Retail Ke Ltd could only terminate the sub-lease after the expiry of 66 months (five years and six months), thus the multinational clothing retailer could only end it after December 3, 2027.
Nova Holdings Ltd argues that in utter breach and violation of the sublease, the defendant terminated it effective July 1, 2025.
“The termination of the lease by the defendant was done prematurely and 29 months earlier than the time permitted by the sub-lease for the defendant to terminate the lease,” part of the suit documents state.
The court will issue its ruling on whether to confirm temporary conservatory orders on November 5.
