Several tenants of Union Trade Centre Kigali have started vacating the building after a recent sharp increase in rent by the property manager. The building belongs to exiled Rwandan tycoon Tribert Rujugiro.
In a letter sent to tenants on May 11, the property manager announced a doubling of rent prices from an average of $17sq metre per month to $40sq metre per month effective July.
Adding to the tenant’s woes, was a new requirement to settle rent upfront for the next 12 months of occupancy.
This triggered an immediate exodus by tenants and several shops and restaurants have since moved out — a development that is likely to affect the remaining tenants if traffic to the mall reduces as a result.
The formerly vibrant food court on the ground floor of the main building is now deserted save for the Bourbon Café lounge.
“We were shocked by the sudden hike and the short notice, which did not give an explanation for the increase. We had no choice but to relocate from there because few businesses can afford to pay the increased rent price and still remain profitable,” said a tenant who asked for anonymity.
However, Nakumatt Supermarket, the anchor tenant at the property and other corporate tenants such as banks appear to have more bargaining power because they occupy large floor areas, which are critical for attracting good flow of people to the building.
“We have written to the property manager asking to renegotiate the rent hike. A final decision on whether to stay or exit the building will depend on their response,” said Adan Ramata, Nakumatt Rwanda country manager.
Even if tenants can afford to pay the new rent prices, the requirement to pay a year’s rent in advance is another challenge.
“We have been paying rent in quarterly installments, the requirement to pay rent annually will put pressure on our capital and could push us to borrow to pay the rent. Either option does not work for us,” said a tenant who runs a phone shop at Union Trade Centre.
Tenants suspect that the move is designed to force them out of the mall, a claim the property managers dispute.
Officials managing the property said the rent revision for Union Trade Centre was aimed at increasing revenues from the mall.
“The management committee discussed the proposed rent increases with stakeholders and the move was seen as being necessary,” said Vedaste Nsabimana, the Nyarugenge District Vice-Mayor for Finance and Economic Development who also chairs the Abandoned Properties Management Commission.
Union Trade Centre, which is the pioneer modern mall in Kigali, was put under statutory management in 2013 after it was classified as an abandoned property.
This followed the departure of majority shareholder Tribert Ayabatwa Rujugiro from Rwanda in 2009. He owns 97 per cent of the stock in the mall, which is valued at $20 million.
It is estimated that the mall collects $120,000 in rent every month and has grossed $5.7 million since the Abandoned Properties Commission took control of its management.
Union Trade Centre came in to the limelight recently, after it was said to have defaulted on Rwf1.2 billion ($1.4million) in tax arrears owed to the Rwanda Revenue Authority.
The arrears which are said to have accumulated between 2007 and 2013 include penalties for non-remittance. The mall is among 70 properties listed as abandoned. They include 67 houses, and it is reported that an auction could be imminent.
Union Trade Centre’s Alex Muhaya, was unapologetic about the rent hikes and advised tenants who found the rates unaffordable to relocate to other properties.
“The malls’ management committee sat down and arrived at the new rental charges using conventional methods for assessing rent. Those that find the new rates a burden should look for other places to work from,” Mr Muhaya said.
The financial status of Union Trade Centre was not available to Rwanda Today.
However, the law governing the management of abandoned properties stipulates that half of the revenue collected from the property should be deposited into an account with the central bank to cater for maintenance, taxes and renovation, while the other half is deposited in a fixed deposit account, also with the central bank.