Former Kenya Airports Authority Board member Isaac Wanjohi, his wife Isabella Nyaguthi and their Gumba Investments are facing bankruptcy proceedings following a protracted battle with real estate juggernaut Acorn Properties that has left the tycoon and his family Sh117.8 million in the red.
Acorn Properties has filed a notice with the High Court, intending to initiate bankruptcy proceedings against the trio if they fail to settle the Sh117.8 million debt by March 31, 2024.
The intended bankruptcy proceedings follow an alleged refusal by Mr Wanjohi, his wife Isabella and their Gumba Investments to honour a 2016 arbitration award.
The arbitration award was adopted as a High Court order and decree on November 1, 2019. Two years later the trio sought and was granted permission by the courts to settle the debt in installments.
Acorn Properties now holds that the debt remains unpaid, and wants the couple and their company declared bankrupt. The notices were filed in the High Court on March 11.
“Take notice that within 21 days after service of this notice to you… you must pay to Acorn Properties Ltd… Sh117,827,732 together with interest thereon at 16 percent per annum claimed by Acorn Properties Ltd being the outstanding decretal sum… Further, take notice that failure to pay the afore-stated amount shall result in Acorn Properties Ltd filing for a bankruptcy order against yourself,” Acorn says in notices to Mr Wanjohi, Ms Nyaguthi and Gumba Investments.
Acorn Properties in 2021 sought to sell the property, but Justice Alfred Mabeya blocked the move on account of the existing instalment payment plan issued by his colleague, Francis Tuiyott.
Mr Wanjohi approached Acorn in 2009 seeking to enter a partnership in which the realtor would oversee construction of a mixed-use development.
Initially, the Wanjohis wanted to put up 48 two-bedroomed apartments and 20 shops, a move that would have achieved maximum annual revenue of Sh28.1 million, court papers show.
But Acorn proposed that they instead put up 181 residential units and 171 commercial units, with an annual revenue potential of Sh106.8 million. Acorn’s proposal was adopted. As at 2013, Knight Frank valued the completed development at Sh720 million.
Acorn also facilitated the securing of a mortgage from KCB, with an initial Sh288.7 million disbursement. The bank later availed another Sh145.9 million in financing.
Under the deal, the Wanjohis were to pay Acorn 10 per cent of the project value upfront. The realtor was also to manage the property through its sister, Acorn Management Ltd.
Acorn was also to earn extra money if it attracted a certain number of tenants. The firm was also to receive an undisclosed number of units whose ownership would be transferred to the realtor.
But after the development was completed, the Wanjohis brought in Realty Plus, a company owned by their daughter, as the property manager.
The Wanjohis through a different company rented all the residential units.
A dispute arose on the contract breach by the Wanjohis, and the matter was referred to arbitration.
The Wanjohis accused Acorn of failing to achieve set tenancy targets.
But Acorn claimed that Realty Plus sabotaged efforts to rent out units, citing examples where its potential clients were turned away.
The Wanjohis also claimed that delays in construction saw them borrow additional funds from KCB (Sh145 million) and Sh70 million (CFC, now Stanbic Bank).
Documents filed before arbitrator Paul Gichuhi indicated that the KCB loan was borrowed to pay professionals engaged in other aspects of the development.
The documents further showed that the Stanbic loan was intended to offset a Sh40 million debt Mr Wanjohi had at Platinum Credit. The Sh30 million of the Stanbic loan balance was intended to buy a 10 per cent stake in Platinum Credit.
Mr Wanjohi claimed that he nonetheless channelled the loans to construction. But arbitrator Mr Gichuhi ruled that no evidence was presented to back that claim.
Under the deal with Acorn, the Wanjohis were only obligated to pay extra fees to Acorn in the event that rental income was sufficient to service the KCB loan.
In 2013, the rental income was Sh5.7 million monthly. The initial Sh288 million loan from KCB was to be paid in Sh4.4 million monthly instalments.
The Wanjohis argued that the additional loans from KCB and Stanbic had pushed up the loan repayments.
Arbitrator Mr Gichuhi ruled that the additional loans were not related to construction hence only the initial Sh288 million from KCB could be considered. This meant that the Sh5.7 million monthly revenue was sufficient to service the initial loan hence Acorn had achieved its contractual obligation.
The Wanjohis had put in a counterclaim, seeking Sh200 million from Acorn. Most of their arguments were dismissed, with only their claim that Acorn overlooked the construction of storm drainage succeeding.
That argument earned the Wanjohis Sh4.9 million in damages and which was deducted from Acorn’s Sh80.5 million. This left Acorn with a Sh75.5 million award, which has grown on account of interest.
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