How last-ditch efforts to save Ubumwe Hotel flopped
Saturday December 29 2018
Ubumwe Grande Hotel in Kigali. The hotel was auctioned as KCB Rwanda moved to recover a $19.4m loan. PHOTO | NMG
Last-ditch efforts to save Kigali’s Ubumwe Grande Hotel from the hammer fell through after Nepal-based Chaudhary Group (CG) flipped on a settlement the shareholders had agreed on.
This followed intense negotiations, with the last round happening in Dubai at the end of November.
The property fetched $34,053,888.90 in the first round on December 24, in one of East Africa’s unique auctions that came in slightly over the reserve price set by the receiver.
Ubumwe was put on the market as lender KCB Rwanda moved to recover a $19.4 million loan that had failed to perform. The reserve price was the value assessed by Kigali-based East Africa Property Consultants Ltd.
Commentators are attributing this outcome to Rwanda’s strict mortgage laws under which opening bids cannot be below the reserve price and an auction can only proceed after at least five bidders have assembled.
The winning bid was offered by Umubano Industries Ltd, jointly owned by Alykhan Karmali, the Managing Director, and Robert Bafakulera, a longtime distributor of the former’s products in Rwanda. The company was registered in 2016 and was in the course of setting up a manufacturing plant in Rwanda, apart from venturing into property development and trading.
Interests
The auction came after several attempts at avoiding liquidation that involved the lenders and the shareholders at different points.
The latest attempt at a settlement came in late November, on the sidelines of arbitration proceedings in Dubai between African Eagle Ltd and CG Group, who jointly own Zinc Africa Hospitality Ventures, a special purpose vehicle registered in Singapore. Zinc Africa Hospitality Ventures held 80 per cent of the stock on Acacia Property Development Ltd, the Rwandan holding company that owned Ubumwe Grande Hotel.
According to sources familiar with the proceedings, CG Group chairman Dr Binod K Chaudhary, had initially accepted a settlement from African Eagle, the other shareholder.
That agreement would have possibly pulled the property out of receivership, but Dr Chaudhary later ordered his lawyers not to agree to the settlement, making the auction inevitable. Apparently, Dr Chaudhary insisted on a payment mode that would have secured his interests.
“The conditions tabled by Dr Chaudhary would ensure that he was home and dry while exposing the other party to risk,” a source familiar with the negotiations told The EastAfrican.
Earlier, in talks that were organised by KCB, the local shareholders had offered to buy CG out and the group had in principle agreed to relinquish its interest in the project. The effort soon ran into obstacles over the terms CG set for its exit.
Rahul Chaudhary, the executive director of CG Corp Global, the holding company for the group’s hospitality investments, declined to respond to these allegations when The EastAfrican brought them to his attention in October.
“Regrettably, due to confidentiality obligations, we are unable to respond in any detail to the stories,” he wrote.
APDL’s attorneys, Nairobi-based JP Miles, also declined to comment on the reports, citing confidentiality.
“We are in receipt of the queries you directed to our client. Our client can neither deny nor confirm any information that you may have obtained from your own sources, and is unable to comment at all on your queries, as they concern a dispute which is subject to arbitration and is therefore confidential,” Rubin Mukkam-Owuor, an assistant director at the law firm wrote in response to our queries at the time.
APDL ownership states it is 80 per cent owned by Zinc Africa Hospitality Ventures, and 20 per cent by Kigali Real Estate Ltd, a Rwandan company.
ZAHV is a special purpose vehicle registered in Singapore in which African Eagle Ltd and CG Group hold an equal stake.
The parties were supposed to jointly develop Ubumwe, but it would be managed by CG Group under its Zinc Hotels brand on contract. CG registered Zinc Hotels and Resorts Kigali to represent it in the management contract but the Zinc brand never went into operation, culminating in termination of the deal by APDL.
According to sources, Dr Chaudhary, or CG Group, who is understood not to have put in any bid for the property, as well as the other shareholders, may stand to lose their earlier investments depending on how the proceeds of the auction are apportioned.