Nyeri's iconic and high-end The White Rhino Hotel is back on the auctioneer’s block due to a debt of over half a billion shillings.
The hotel’s non-payment of the money owed to the Kenya Commercial Bank (KCB) is attributed to the adverse effects of the Covid-19 pandemic on the hospitality sector, which have led to the closure of various hospitality and tourism facilities in the region and other parts of the country.
The lender kicked off the auction process again Monday November 14 through a newspaper advertisement, three days after the High Court dismissed the hotel's case filed to stop a sale advertised earlier this year.
The hotel’s management argued that the property had been undervalued and that the auction would not be favourable "as that would mean a denudation of the commercial property as an iconic historical hotel".
Court papers indicate that the one-time exclusive hotel for white settlers and later for wealthy individuals, managed by Cedarwood Hotels & Resorts Investment Company, owes the bank Sh670,104,696 as of May 31, 2022, and which sum continues to accrue interest.
The 112-year-old hotel situated in Nyeri town sits on a three-acre piece of land adjacent to the KCB bank building.
Dismissing the hotel's case, Justice Florence Muchemi said the firm failed to demonstrate that it will suffer irreparable harm should the intended sale take place.
She added that undervaluation, if any, is not a good ground to stop the sale of a property used as security for a loan and that a commodity offered as security for a loan facility is understood by both parties to be for sale in case of default from the time of signing the contract.
"It is not in doubt that KCB has the capacity to pay any damages in case of any loss due to undervaluation," said the judge.
Another finding was that the firm failed to offer evidence showing the assessment done by the bank was a complete undervaluation of the property or that the valuer, Acumen Valuers Limited, was unqualified.
A report dated August 27, 2021, by Acumen Valuers Ltd, which was hired by the bank, put the property at a market value of Sh842 million and a forced sale value of Sh631 million.
The management firm did its own valuation and found that the value was Sh1.15 billion with a forced sale value of Sh863 million. It told the court that the figures were over and above those of the bank’s reports.
Stating that the property had been grossly undervalued in an effort to deprive it of its commercial market value, the firm said the undervaluation was ill-conceived and in bad faith.
The firm said it was apprehensive that if the bank auctions the property with the disputed valuation, it will not cover the outstanding loan, which is still accruing interest, and the balance will be a liability to the firm.
But the bank denied undervaluing the property and contended that the difference in market value was due to a decline in property values resulting from the economic challenges caused by the Covid-19 pandemic.
In any event, the bank stated that a valuation report presenting a higher market value than the one it sought to rely on did not warrant the granting of an injunction order against the intended auction.
The once-exclusive club for Europeans is associated with the family of former Kieni MP Munene Kairu and was gazetted as a national monument in 2001.
The debt dates back to November 2013, when the suit property was used as security for a loan of Sh295 million.
The bank advanced a further loan facility of Sh175 million in April 2015 owing to the hotel's positive credit score.
In 2017 the bank amalgamated the hotel’s loan facilities into one, amounting to Sh520,665,987.
The court heard that in 2019, the coronavirus pandemic hit, and the hotel was undeniably affected and forced to shut down its operations from February to September 2020, thus its obligation to make scheduled payments fell short due to cash flow difficulties resulting from the total closure of its business.
In a bid to continue paying its debt, the hotel stated that it sought to use the property as a hospital by engaging various local and overseas groups to put the property to an alternative use.
By a letter dated July 29, 2019, it proposed to pay a full and final settlement of Sh450 million on onboarding a hotel operator and securing an equity investor.
But pursuant to a letter dated November 4, 2019, the bank declined the proposal, leaving the hotel with the only option of securing a hotel operator.
In view of the challenging circumstances, the hotel made another proposal dated May 19, 2022 to make payments of Sh1.5 million every 45 days with a request to the bank to allow negotiations with the strategic hotel operator to crystallise.
Again the bank declined the proposal on the basis that the amount was too low to make an impact on the total outstanding amount and advised the hotel to seek an equity partner to dispose of the property.
Despite the active negotiations with the bank and with other hotel operators, the bank instructed Garam Auctioneers to publish and advertise an auction for the property on June 2, 2022.
The process was, however, temporarily halted by the court pending the hearing of the case.
November 30 auction
The entertainment and conference joint facility, which was founded in 1910 and named “The White Rhino” after white settlers shot and killed a rhino at the site, is set to be sold by Garam Auctioneers on November 30 outside the Nyeri main post office.
According to the auctioneers, the leasehold property, for a term of 50 years effective September 1, 2008, has annual revisable ground rent of Sh146,400. They add that the land rates were in arrears of Sh1,239,704 as of July 10, 2021.
“Bidders will be expected to produce a bidding deposit of Sh10 million by way of cash or bankers cheque before being allowed to bid,” Garam Auctioneers said.
The multi-storey hotel building has a bar, restaurant, staff quarters, administration block, coffee shop, butchery, gatehouse, basement parking, and a borehole.
The facility is the fourth landmark hotel in the region to close down owing to the effects of Covid-19. The others are Outspan, Treetops, Serena Mountain Lounge, and Green Hills.
Outspan and Treetops, built in the 1920s, were put up for sale in October 2021. Outspan was home to the founder of the Scouts movement, Lord Baden-Powell, from 1938 to 1941. Treetops earned global recognition as the hotel where Elizabeth II went to bed as a princess and woke up as a queen after the death of King George VI.
Serena Mountain Lounge, on Chaka Road in Nyeri, shut down in March last year. The hotel located in the Mount Kenya National Park was famous for its forest adventures.
The Green Hills Hotel, associated with former President Mwai Kibaki, has closed and reopened twice since the onset of the pandemic. It closed its operations again in March 2021.
It opened in the 1970s and built its reputation by becoming one of the landmark hotels in Nyeri, especially for business travellers.