Tatu: The inside story of the promised city

Photo/FILE

Renaissance MD Arnold Meye displays a model of Tatu City.

There may be no walls or a gate to the fabled Tatu City, but that does not exclude the more than 1,000 hectares of land meant to host Kenya’s largest real estate project from harbouring deep secrets on the intricacies that make a mega deal.

Behind the estimated Sh240 billion real estate concept lies suspicion, mistrust, manoeuvres and counter manoeuvres which have put the proposed city at the risk of defaulting on a Sh5 billion ($62.5 million) loan it took to buy the land where the project is to be built.

The intensity of these are reflected by the fact that at least 11 applications have been filed in the High Court in a span of 11 months, ranging from contempt of court, disqualification of lawyers handling the case, appointment of liquidators, to the latest where one of the parties wants the judge hearing the case to disqualify himself.

A criminal case on account of forged documents is also pending at the magistrate’s court. It did not start with the court cases: the Tatu City Concept is owned by CedarSoc, a private offshore company registered in Mauritius, industrialist Vimal Shah (Bidco), former Central Bank governor Nahashon Nyagah, Mr Stephen Mwagiru and his mother Rosemary Wanja, among other people.

The proportion of shareholding for each is disputed and is one of the issues before the High Court for determination.

It has several parcels of land in Kiambu held by Socfinaf, a subsidiary of CedarSoc and Waguthu Holdings Kenya (WHK).

To get full ownership of the more than five coffee estates estimated to cover over 5,900 acres, the project borrowed $62.5 million (about Sh5 billion), which was arranged by Renaissance Partners Investment, payable within a year and charged at 33 per cent interest per annum.

The strategy was to sell some of the estates and repay the loan, while securing debt and equity financing to build Tatu City.

The city is expected to house about 62,000 residents who, according to the investors, will be able to live, work and play within their community. It will welcome over 23,000 visitors daily.

The woes arose when the parties commenced disposal of the parcels of land. One instance was captured in filed court documents arising from communication on sale of a parcel of land to Jomo Kenyatta University of Agriculture and Technology (JKUAT).

“A curious but very disturbing aspect of the whole process was that at no time did they (JKUAT) mention the need for us to ‘take care’ of their agents as per the various emails sent by Steve (Mwagiru) below,” Mr Josphat Kinyua, one of the directors/shareholders noted in an e-mail sent in April 2010, after he signed the sales agreement with the university.

Mr Stephen Mwagiru, who was leading negotiations with the Juja-based education institution, had in one of the e-mails noted that JKUAT had placed a request that they pay agency fees on behalf of the learning institution.

Threatened to resign

The content of the e-mail seems to have angered Mr Mwagiru, who replied threatening to resign as a director and sell his stake in the company... and “with the extra time at hand and a little money to boot will buy a skiff, grow a beard and join my buccaneering brethren in the Somali coastal waters as it is where this misguided lot believes I belong.”

He started off the mail by revisiting old issues of mistrust and suspicion. “I am surprised that this little bandwagon of conspiracy theorist is still going at me hammer and tongs, instead of focusing on the more important issues,” said Mr Mwagiru before listing a sequence of events which he believes exonerated him from blame.

He was to add: “If the majority of the principals of CedarSoc and WHK are convinced that I am out to pull a fast one at every opportunity that avails itself, then the situation we are in is completely untenable and must be dealt with right away or it will be detrimental to the whole group and even to its operations.”

Mr Mwagiru later went to court seeking to dissolve Tatu City, saying the directors were engaging in systematic and wanton asset-stripping — a technical term used to refer to the process of buying an undervalued company with the intention of disposing its assets at a profit, and in some instances without paying off its debts.

He says he was not supplied with the management report of the company and claims he had been excluded from participating in the management and decision making of Tatu City and that attempts to discuss their predicament with the company were met with threats.

As the court cases drag on, so too is the project. Already the project is a year late. Primed for a major take off after planners showcased it to foreign investors at an annual property conference in Cannes, France, last year, it was to be met by court battles.

According to the master plan, it was anticipated that by now land parcels would already have been transferred to the owners.

Actual marketing was meant to kick off last year, which was to be followed by the building of basic infrastructure, to commence in the first quarter of this year.

The plan shows that the first land owners were to start constructing in the third quarter of this year. But this may not be possible owing to the rows.

Latest court documents reveal growing pressure from investors, who to date have been unable to sell some eight parcels of land under caveat whose proceeds were to settle the debt, which was due by March 15, 2011.

The debt is attracting a 33 per cent interest a year, in addition to penalties that come with defaulting.

In response to the latest court application, one of the Tatu City directors claims that Mr Mwagiru was part of the meeting that authorised the sale of the land to pay the debt.

“Prior to the institution of the winding up proceedings, and with full knowledge and co-operation of Mr Stephen Mwagiru, Kofinaf entered into binding agreements to sell the property, which the injunction is being sought.

“This sale was necessary so that the company can service the debt,” said Mr Kinyua, who is acting on behalf of CedarSoc, in papers filed in court.

Sources familiar with the deal confirmed that the principal amount is yet to be repaid, meaning that the loan will have attracted over Sh2 billion in interest alone by next month.

Last week, Mr Mwagiru’s lawyers asked Justice Apondi to disqualify himself from hearing the application, arguing that they did not expect to get a fair hearing before him.

But Justice Apondi on Friday declined to disqualify himself from hearing the suit, adding the latest twist to the fierce court battles that are threatening to derail Kenya’s single largest real estate investment by the private sector.

Justice Apondi instead asked the lawyers to go ahead and prove their claim in an open court. This and the other rows are adding to the growing list of cases stealing the show from the main bone of contention — the winding up suit.

Meanwhile, investors have to deal with the risk of losing potential buyers, negative publicity and defaulting on loan repayments.

This comes at a time when Kenya’s large real estate projects are facing many court battles under the new Constitution.

Dust is yet to settle on the Sh30 billion Fourways Junction feuds that cast a long shadow on the 500 residential units project.