A private municipality

Tatu City has bagged crucial approval from government agencies signalling that investors want to plough ahead with the plan for what is billed as the country’s largest private investment in real estate – despite courtroom battles by the founding shareholders.

Renaissance Capital representative Josphat Kinyua told DN2 this week that the company has now had the master plan for developing the city approved by the Ruiru Municipal Council, under whose jurisdiction the investment falls.

The National Environmental Management Authority has also given a nod to the investors who plan to build a city with the capacity to accommodate as many as 62,000 residents.

In addition the development will contain a stadium, technology park, hospital, housing, retailers, office towers and playgrounds.

“Ours is only the second master plan to be approved since independence the other having been Buru Buru. But the difference is that this is much bigger and will be a privately run municipality.

“We have made substantial progress with the Water Resources Management Authority and created a plan where five per cent of the water volumes will be for the adjoining communities,” Kinyua said.

Tatu City is inviting consultants with big city experience for the planning and design and eventual running of the city which will be modelled to have residents all the way for the high-end income earners to the lowest ranks in addition to office complexes, recreational areas and parks.

“We plan to have a fruit salad kind of mix in terms of the residences and use of space that we will have across the city,” said Kinyua.

The dream for a mega city was born around 2007 when a group of potential developers left Nairobi for a tour of a number of capitals to see how best they could bring a mega dream alive, India was the place they would find an answer.

On the flight was the rather reserved former Central Bank Governor Nahashon Nyagah, Bidco boss Vimal Shah and little known Steve Mwagiru whose family had cut their teeth deep into the coffee farming industry over time. Mwagiru was instrumental in the acquisition of the land since his family has been in the large coffee estates business but he is now a thorn in the flesh for his fellow shareholders in the multi-billion shilling investment.

The flight to a dream city had started back in 2007 when the three Kenyan businessmen had approached Renaissance Partners, an international investment banking and business advisory firm.

Together, they would find the money to invest in two large-scale coffee estates in Kiambu County. As they ran the farms, they had other plans; they would seek government permission to transform the farms into a large real estate venture where they would lead the way and provide the Infrastructure for Kenya’s first privately run city.

In October of 2008, the business partners acquired the necessary approvals to change the use of the properties from agricultural to commercial on October 15, 2008.

The flight to India would take them for a first hand account of privately run cities in India and what they needed to do to build an entity of that scale.

The Asian nation encourages the construction of such cities and different Indian states compete for investors willing to put up such projects.

When they returned to Nairobi, the company developed a brief and invited a number of local and international architectural firms to compete for drawing and designing what would be Tatu City.

The invitation-only competition, according to company documents seen by DN2, attracted architectural firms from Kenya, the UK, Canada, South Africa, and as far as Lebanon. It was won by a consortium of a Canadian and a South African firm.

Their dream was fuelled by the findings of a research the nascent firm had commissioned pollsters Synovate Kenya to conduct on the state of housing in Nairobi and its future.

The study established that was demand, which demand has fuelled Kenya’s property market in the past six years.

According to the National Housing Corporation, the annual demand for houses is estimated at 150,000 units whereas the market can only supply 30,000 units, creating a shortfall of 120,000 units each year.

The investors were also informed by research conducted by the City Mayor’s Foundation which places Nairobi as the 117th largest city in the world this year and predicts that it will jump to position 73 by 2020.

The position is premised on the population which is currently 3.3 million and which is projected to rise to 5.02 million by 2020.

The Synovate researchers found that Nairobi has a large shortfall of desirable houses and to fill it, Tatu City would build Kenya’s grandest residential and recreational complex, with a price tag of about Sh240 billion ($3 billion).

Located 40 kilometres North of Nairobi on a former coffee farm in Kiambu County, Tatu City’s basic plan is to become a complex that offers commercial and recreational facilities, including a football stadium.

The 1000-hectare estate will also have amenities like schools and hospitals to cater for residents and an estimated 23,000 visitors every day, with the first occupants expected, according to initial plans, by next year.

Already, the prospect of the city has pushed up property prices in adjacent places to unprecedented levels.

The Tatu City investors were also buoyed by the incongruity of high-end office blocks becoming popular in Nairobi without the infrastructure to support them — the streets, the water and sewerage systems and security have not expanded in decades.

They considered various investment options and then turned to the one company that had arrived in Nairobi in 2007 and announced its intentions to invest in the East African Capital markets.

“Every day you see and hear people complain about the bad roads in Nairobi, the poor services from local government, but there is nothing being done about it.

“We knew that we cannot change the city, but we can create a planned residential complex, like Tatu City. We came together and decided that we could do it,” Vimal Shah would tell The Nairobi Law Monthly in December last year.

Nyagah and Shah, it would appear, had taken note of an announcement that Renaissance Capital made when it was setting up shop in Kenya in early 2007. Stephen Jennings, the Moscow-headquartered investment group’s chief executive and founder, said Renaissance would “shake up” East Africa’s capital markets.

In 2007, Nyaga, Mwagiru and Shah approached Renaissance Capital hoping to acquire Socfinaf Company Ltd from its foreign owners.

The trio had already acquired the rights to acquire the property through a company named Waguthu Holdings Ltd in which Rosemary Mwagiru and her son owned 100 per cent and were named as the company’s founding directors.

The potential business partners hired Anjarwalla and Khanna Advocates, and audit firms Ernest and Young and PriceWaterhouseCoopers to conduct due diligence.

As it turned out, Renaissance was unable to participate in the transaction at that point because of legal and technical issues around ownership structures and the use of the properties that needed to be ironed out.

The sponsor would subsequently register two offshore companies, Cedar IV and Manhattan Coffee Investment Holdings Ltd.

The companies were registered in Mauritius to cater for strategic reasons. On March 4, 2009, Cedar IV (Mauritius) Ltd became the 99 per cent owner of Waguthu Holdings (Kenya Ltd.

The other shareholders, each holding a share are listed as Judith Nyaga, Vimal Shah, BD Shah, Tarun Shah, Deepak Shah, Stephen Mwagiru and Rosemary Wanja Mwagiru.

While acquiring the properties and planning on how to realise the new dream, the investors faced a new problem right in their boardroom.

Steve Mwagiru proposed some time in 2008 to act as the chief executive of the coffee farms until the other commercial plans bore fruit.

The shareholders would in less than a year, disagree over the manner in which the coffee business was running, pending the actualisation of the Tatu City dream and Mwagiru fell out with his new business partners.

That was last year, the very same year when, using their good connections, the partners had planned for a high-level launch of the city which President Kibaki would officiate.

By then, they had put in more than $70 million (about Sh6 billion) into the project. (To date, they have sunk in excess of $100 million — about Sh9 billion— in acquisition of properties and other ground preparations.

As it turned out State House got to know of the disagreement between Mwagiru and the rest of the shareholders.

With procedures in place and press adverts published, the boardroom troubles would cost the investors what they needed most at the time.

President Kibaki’s handlers opted to leave the Head of State out of and instead deputised Metropolitan Minister Njeru Githae for the launch.

The boardroom quarrels would soon later find their way to the courts at the end of last year where to issues are now up for arbitration.