Njenga Karume's Jacaranda Hotel under threat of auction to clear bank loan

The troubled empire of the late politician Njenga Karume is this week set to face a litmus test as one of its prime assets - the Jacaranda Hotel - once again faces the threat of being auctioned to clear a bank loan, the Nation has learnt.

The hotel, which is among the few surviving businesses left behind by the late billionaire, has been subject to numerous legal proceedings between auctioneers and the trustees the former Cabinet minister appointed to oversee his estate.

Mr Karume, a former Defence minister, died of cancer in February 2012, leaving a vast estate. Besides the Jacaranda Hotel, the tycoon owned the Lake Elementaita Lodge in Nakuru as well as the Indian Ocean Beach Resort.

He also had shares in Standard Chartered Bank, Kenya Wine Agencies Limited (KWAL) and a flurry of commercial and residential blocks spread across the country. Since his death, however, a never-ending tussle between his children and the trustees has contributed to a slow demise of what was once an enviable empire.

Huge debt

Furthermore, the late minister, who at the time of his death was worth Sh40 billion, left behind a huge debt which his trustees have struggled to clear, forcing his family to sell some of its property in order to stay afloat.

And now, in what is set to be another blow to the Karume empire, the 128-room four-star Jacaranda Hotel is set to go under the hammer on March 12.

“The hotel development comprises of a main hotel block in three wings, incorporating the hotel reception, lounge, bedrooms, administration offices, conference facilities, restaurants, detached kitchen block, swimming pool with changing rooms, poolside restaurant, bar and refreshment bandas,” says a leaked notice of the intended auction by Regent Auctioneers, ahead of the official advertisement.

A call by the Nation to Regent Auctioneers confirmed the prime hotel which sits on 3.5 acres is set to be auctioned. The Nation understands that a valuation of the hotel, which has been closed for some time now, has been done and that what remains is the setting of a base price which will guide the auction.

Parties' agreement

The hotel has, for the past few years, been in financial trouble due to a Sh250 million loan it took from the Guaranty Trust Bank in 2014 and 2015. Apart from the loan, the hotel took an overdraft from the same bank for working capital financing. The two loans were amalgamated in 2017.

At the same time, Regent Auctioneers has been demanding Sh36 million from Jacaranda, as the auctioneers' fee, following last minute talks between the hotel and its debtors that saved it from auction in January last year.

Although Justice Wilfrida Okwany did save the hotel from the auctioneers' hammer she gave it 90 days to redeem its loans. The parties agreed, in a consent filed before Justice Okwany, that if the hotel defaults in payments, the bank “will be at liberty to sell the suit property through public auction".

Additionally, all parties agreed that Jacaranda Hotel would process funds from NISK Capital or any other financier within three months. Other than the principal loan, the financier was to take over the interest and arrears which were at that time estimated to be Sh300 million.

The hotel had been scheduled for auction on two occasions before last year’s agreement, which was made before Justice Okwany. On both occasions - on October 5, 2018 and July 31, 2019 - the hotel came up with repayment proposals.

But on Friday, last minute negotiations were still ongoing between GT bank and the hotel, with the hope of saving it again. If the negotiations don’t yield positive results, the iconic hotel will be auctioned.

Strained relationship

The late Karume built his business empire from charcoal as detailed in his book 'Beyond Expectations: From Charcoal to Gold'.

In the book, he recalled starting his first business in primary school where he used to buy and resell stationery. He had 25 businesses in total by the time he succumbed to cancer.

His children, Lucy, Albert and Samuel, have since held that the trustees their father appointed have mismanaged the properties. So bad has the relationship between the late minister’s family and the trustees been that one of his grandchildren died due to cancer as she was unable to raise money to cater for her medical bills.

Michelle Karume, who died on September 14, 2019, had penned an emotional appeal for funds to the trustees of her late grandfather’s multi-billion shillings estate.

“The clock is ticking while every day I sit by my phone to hear some good news on funds, but three months later I am waiting here; still waiting for my phone to ring, but in return I get less communication to a point nobody can pick up my calls,” she wrote months earlier.

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