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.
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