Woman, husband fight over Nairobi real estate billions

Hundreds of home buyers, who invested millions of shillings in one of Nairobi’s priciest real estate developments, have been caught in a grand ownership battle pitting a woman against her husband and eight others.

At the centre of the battle is Fourways Junction, a sprawling real estate development in South West Nairobi that is made up of 500 top-of-the-range residential houses, which one of Kenya’s best known real estate queens, Sue Muraya, has been building and marketing in the past four years.

Now, a matrimonial row is threatening to stall what has been the poster child of Nairobi’s real estate boom that began five years ago and has arguably created the greatest number of Kenya’s growing list of multi-millionaires.

Nancy Wanja Gatabaki, a director of Muga Developers – the company that owns Fourways Junction – has sought and obtained court orders restraining other directors, including her husband, from any dealings involving Fourways Junction estate and any bank accounts held by Muga Developers, leaving the homeownership dreams of the buyers in jeopardy.

In the suit, Mrs Gatabaki is first taking on her husband, Dr Samuel Gatabaki, over the structure of shareholding in Sagana Developers Ltd, the firm they co-owned and was the initial owner of the 200 acres on which the Sh30 billion estate stands.

Joint venture

The battle then extends to Muga Developers Limited, a firm they co-own with Suraya Property Limited – and which has been developing the Fourways Junction property. Suraya is a real estate company owned by Sue Muraya and her husband, Pete. Mrs Gatabaki claims in her suit papers that while Fourways Junction estate was to be a joint venture between Suraya Property and the Gatabaki family, she had been sidelined and her shareholding watered down to her disadvantage.

Located some 500 metres from the upmarket Runda Estate, and overlooking the newly opened Northern by-pass, Fourways Junction is strategically placed.

On completion it was to hold a mix of cluster houses, apartments, office blocks, a shopping mall, a three-star hotel, and fully fledged country club.

But that was until Mrs Gatabaki went to court, claiming more than half of the 180 acres on which the estate is built. Her lawyer Ashford Mugwuku of Ashford and Co Advocates says his client had been sidelined from the control of the estate with an estimated value or more Sh30 billion, and is now demanding at least Sh20 billion from the estranged co-directors.

“All that my client wants is for the defendants to pay for her share of the land at market rates and compensation for lost income,” Mr Mugwuku told the Business Daily.

Caught in the cross-fire are hundreds of home buyers who have so far paid Muga Developers close to Sh2 billion for off-plan home purchases and whose dream of owning a home now depends on how fast the courts move in hearing the dispute.

Muga Developers becomes the second multi-billion shilling real estate project to be rocked by shareholder wrangles, after similar woes hit the Sh200 billion Tatu City, delaying its takeoff. In the Tatu City project, two shareholders, Mr Stephen Mwagiru and his mother, Ms Rosemary Wanja, have demanded dissolution of the company, accusing other shareholders, including Moscow-based Investment Bank Renaissance Capital, of sidelining them in decision-making. (See: Tatu City ownership battle starts after 8-month delay)

Court documents seen by the Business Daily show that Muga Developers was formed between May 2007 and February 2009, when Pete Muraya - the managing director at Suraya Properties approached the Gatabakis with a proposal for a joint venture in property development.

Suraya Properties would inject funds in the project, while the Gatabakis’ contribution was the land owned by Sagana Developers, allowing for a 50:50 stake in the new outfit, Muga Developers.

Mrs Gatabaki essentially owned 25 per cent of Muga Developers, but the articles of association allowed for entry of a strategic investor who would be allowed to invest between Sh200 million and Sh300 million in exchange for a stake.

She now claims that the Murayas increased their stake to 67 per cent, leaving the remaining stake to be shared jointly between her and Dr Gatabaki.

Mr Mugwuku claims that his client was kept in the dark while all the changes, among others the introduction of a fifth shareholder, Frangie Investments which owns the 12 per cent stake, previously held by the Gatabakis took place.

“The changes were fraudulently done, and my client ought to have been involved because she was a principal shareholder in company,” he said.

The temporary orders issued by the commercial court last Thursday sought to bar the nine defendants, including Equity and I&M banks, from any transactions touching on the property or related bank accounts. Mr Mugukwu says that the other directors charged the company’s land as collateral for two loans worth Sh2.1 billion from the two lenders without her knowledge and that the funding should have been injected into the project as equity.

Pete and Sue Muraya- the owners of Suraya Property Group, and Dr Samuel Gatabaki, who are the other three original directors in Muga Developers have moved to court to quash the temporary orders in order to calm the nerves of the buyers. “Whilst the orders may cause a delay in the completion and handover of the project, we are proceeding to court to set aside the said temporary orders and shall keep you informed of the matter in court,” read a statement signed by the three.

Boardroom wrangles

The Fourways Junction situation reveals of the extent to which home buyers are exposed to the board room wrangles, despite having committed their funds in housing projects with realtors placing off-plan purchases at three-quarters of all new home sales.

Parallels between the two cases is the question on land, whose prices have shot more than five-fold over the last five years, especially around up-market neighbourhoods around Nairobi such as Runda and Ridgeways, which are adjacent to the housing project by Muga Developers. Former Githunguri MP Njehu Gatabaki, who is a brother to Dr Gatabaki, is also fighting a legal battle against his wife Rachel who has moved to court seeking to restrain him from selling a 20 acre piece of land that was initially part of the 200 acre farm back to Muga Developers. The case is pending in court.

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