- East African Development Bank had on December 23 appointed receiver managers—George Weru and Muniu Thoithi— for the Tuju property under Dari Limited to prepare for the sale of its assets to recover the Sh1.53 billion debt.
- EADB accused Dari, where Mr Tuju and his children are directors, of breaching the debt agreement and defaulting on the loan.
- Mr Tuju, who made his wealth from the media business, has invested heavily in real estate.
Jubilee Party Secretary-General Raphael Tuju has launched a court fight to block the auctioning of his properties over a botched Sh1.53 billion ($15.6m) loan deal meant for the development of luxury homes in Nairobi’s Karen suburb.
Mr Tuju will return to the High Court Friday to know his fate after Justice Maureen Odero blocked the East African Development Bank (EADB) on December 24 from operating or selling assets the Cabinet Secretary had used to access the multi-million dollar loan.
The loans were targeted for the construction of Sh100 million two storey, flat-roofed bungalows sitting on a 20-acre forested land dubbed Entim Sidai and purchase of a 94-year-old bungalow built by a Scottish missionary, Dr Albert Patterson, which currently operates as a high-end restaurant.
But development of the 12 luxury homes worth Sh1.2 billion has fallen behind schedule in a business environment where property developers are finding it difficult to sell units that were built on loans, setting the stage for defaults and asset seizures.
The multi-national lender had on December 23 appointed receiver managers—George Weru and Muniu Thoithi— for the Tuju property under Dari Limited to prepare for the sale of its assets to recover the Sh1.53 billion debt.
EADB was enforcing the judgment by a London court that ruled that the Kenyan politician had defaulted on the multi-million dollar loan, which includes the principal and interest.
Mr Tuju last week received a seven-day order, which lapses Friday, stopping the receiver managers from taking over the property, arguing that EADB was frustrating efforts to have a Dubai-based investor —ZLivia— invest in the property to make it profitable.
“In complete disregard of the deliberate efforts by the plaintiffs (the Tujus) to return the project on profitable trading, the defendant (EADB) has proceeded to appoint receiver managers over all the assets of the plaintiff to engage in the sale and realization of the plaintiff assets and properties as its primary option,” Mr Tuju said in court papers filed on December 24.
The bank says the debt, which it advanced on July 31, 2015 at $9.19 million (Sh932.7m), has remained in default since 2017 when it fell due.
The London court dismissed Dari Limited’s opposition to the bank’s claim, setting the stage for the lender to seek enforcement and auction.
The London court’s documents showed that the restaurant had entered into an agreement with the bank on April 10, 2015, under which it agreed to give Dari a $9.3 million (Sh943.9million) loan.
The deal gave the restaurant a 24-month grace period, which fell due in 2017.
But two years later, Dari had failed to pay $1.8 million (Sh186 million) in interest owed, according to the bank, adding that Mr Tuju had ignored a notice to clear the debt.
Among the accusations the defendants, who include the Cabinet Secretary’s children Mano Tuju, Alma Tuju and Yma Tuju-- faced were breach of agreement and defaulting on the loan repayment.
EADB accused Dari, where Mr Tuju and his children are directors, of breaching the debt agreement and defaulting on the loan.
The court also dismissed Dari’s counterclaim, which stated that the interest rate charged by the bank was a penalty that was not unenforceable.
The judge disagreed, ruling that it was a standard clause in loan agreements of the type advanced to the hotel.
“The court is in a position [to conclude] that the rate of default interest is not penal and that the proposed defence does not have a real prospect of success,” the judge ruled.
Mr Tuju has opted to fight his battles in the Kenyan court and accused EADB of breaching terms of the loan deal, which made it difficult to complete the high-end real estate project.
First, Mr Tuju accused EADB of disbursing Sh932.7million instead of the agreed Sh943.9 million, adding that the bank had reneged on the plan to offer Sh294 million for building the luxury homes for sale.
The bank directly paid the Sh932.7 million to the owner of the 94-year-old bungalow sitting on the 20 acres, and demanded that Mr Tuju provide additional security for construction of the Sh100 million bungalows.
“Having failed to disburse the balance of $102, 916 (Sh 10.4million) and further Sh294 million, the first defendant inevitably experienced cash flow challenges,” said Mr Tuju.
“EADB is fully aware that in the absence of the development of the housing units for sale as envisaged in the project proposal, Dari would not be able to service the loan facility,” he added.
The Entim Sidai luxury homes development comprised five bedroom homes worth Sh100 million each. They have two jacuzzis in two master bedrooms with a translucent roof that lets in natural light where families live next to century-old trees and the historic bungalow.
The Victorian bungalow currently operates as a spa and restaurant with rooms to let. There is one room for honeymooners that goes for Sh43,000 a night.
The property has preserved Dr Patterson’s furniture, wall clock, gramophone, wall clock and a 60-year-old fridge among other items.
Mr Tuju says that EADB stalled on building the luxury homes. He also accuses EADB of stopping KCB Group #ticker:KCB from taking over the loan and derailing equity investments in the deal by Dubai investors.
“The defendant is frustrating the plaintiff’s efforts to secure alternative funding thereby clogging the plaintiffs right to redeem the facility,” he added.
Mr Tuju, who made his wealth from the media business, has invested heavily in real estate.