Pattni land deal raises questions

A row has erupted over the sale of prime government property in Nairobi to a company believed to be associated with Goldenberg architect Kamlesh Pattni.

A Sh3 billion development is planned for the prime plot granted by the Commissioner of Lands on a 50-year lease on which the company is required to pay rent of only Sh1.6 million a year.

The government leased the land to casino operators in 1969 and on renewing it in 1983 for a further seven years, included the condition that the land and developments on it would revert to it at the expiry of the lease.

In 2008, the Commissioner of Lands issued a title deed to Galaxy Walker Limited to use the land for 50 years, according to documents seen by the Daily Nation. The property has since been transferred to Azarel Investment Ltd and the land registration number changed.

The property has multistorey developments worth tens of millions of shillings on it and is home to popular entertainment joints such as Galileo, Club Afrique, Blue Times, and Ale House.

All of them are being demolished even though they are supposed to be government property.

The transactions took place despite a government warning, called a caveat emptor, that the property should not be interfered with.

The caveat, put by the Ministry of Home Affairs and dated April 21, 2005, cautioned that the property, LR 209/7437 (International Casino), situated at Museum Hill, was not free for sale, sub-division, hiring or otherwise.

“Further take notice that any person or company who attempts to sell, sub-divide or sub-let the property risks to be prosecuted,” the notice warned.

Lands Commissioner Zablon Mabea denied that the property had been sold. He also said the L/R number was changed because the use to which the land was being put has changed. Under normal circumstances, the L/R does not change even if there is change of user.

Galaxy was issued with a title deed on November 1, 2008, according to Lands records seen by the Daily Nation.

Home Affairs permanent secretary Ludeki Chweya said he needed time to check the records to establish whether it is his ministry which owns the property.

The PS said the Betting Control Board only licences casinos and does not own the buildings.

From the documents it is not clear under what circumstances the property was transferred to Azarel.

Azarel has ambitious plans for the land and players in the tourism industry claim its development will propel Kenya to the league of leading tourist destinations in the world.

A Judicial Commission of Inquiry into the Goldenberg Affair found that Mr Pattni, while pretending that he was bringing in foreign exchange, defrauded the country of billions of shilling through fictitious gold exports on which he was paid export compensation.

Goldenberg is possibly the worst corruption scandal in Kenya’s history. It nearly destroyed the economy and caused many years of hardship.

Azarel has grand ambitions and tourism stakeholders say that its “high class tourist facilities will change the face of Nairobi”.

The saga has since gone to Parliament after Ndaragwa MP Jeremiah Kioni asked Lands minister James Orengo to explain how prime government property ended up in private hands. Mr Orengo’s answer is pending.

Mr Mabea, in an interview with the Nation, said the land was still government property and had not been sold to a private developer.

He said the property was transferred by National Industrial Credit (NIC) Bank to a third party with Treasury’s approval in order to recover a loan taken by a previous leasee who had used the property as security.

It is not clear how a private company was allowed to use government property as security for a loan.

Mr Mabea said as a result of the arrangement, the government has been able to recover Sh92.2 million in land rent arrears which had accumulated over the years.

Tourist Paradise Investment used the property to secure a Sh160 million loan from NIC, which it did not service.

By the time NIC sold the property, the land rent had accumulated to more than Sh200 million. The bank sold the property to Galaxy Walker Ltd for Sh155 million.

He said the Ministry of Finance waived land rent penalties amounting to Sh98 million and NIC Bank paid the government Sh92 million in outstanding rates before transferred the property to Galaxy.

But it is a different firm —Azarel Investment Ltd — which plans to build a so-called seven-star hotel on the property, apparently at a cost of Sh3 billion.

The property is located on Uhuru Highway/Westland Road and Chiromo Museum Road Junction and is popularly known as the International Casino Complex.

Documents seen by the Daily Nation show that the property was leased to a company known as Tourist Paradise Investments Ltd, associated with a group of Italians led by a Dr Labriolla, for the purpose of putting up a casino business.

However, upon expiry of the Italians’ lease and a subsequent extension in 1990, Mr Ketan Somaia, a business rival of Mr Pattni, acquired 80 per cent shareholding in Tourist Paradise Investments Ltd.

This resulted in the lease being extended to June 12, 2009 and the land rent was increased from the previous Sh750,000 to Sh6.3 million.

However, according to this lease agreement, upon its expiry, the land, buildings, all improvements were to revert to the government without payment of any compensation whatsoever.

The International Casino Complex was at one time the cause of a legal battle between Mr Somaia and Mr Pattni after the latter bought into Tourist Paradise Investment Ltd through Galaxy Walker Ltd.

It is not clear whether this matter was settled by the court before the current change of ownership, although the Daily Nation has seen other court documents on cases related to the property, including an undertaking by Mr Pattni and his lawyers that the property would neither be sold nor used as security for loans.

Shopping mall

Azarel’s development plans include a “seven-star” hotel, shopping mall, health spa and swimming pools, gymnasiums, supermarkets, banking halls, food courts, bars and restaurants, casinos, conference centres, offices and business centres, car parks and cafeterias.

The lease is expected to run until 2060, at a rent of Sh1.6 million, which is much lower than the Sh6.3 million that Paradise was supposed to pay.

Mr Mabea said only valuers could explain the change in the annual rent although he defended the new rate, saying it was based on current valuation.

Rent and land prices in all parts of Nairobi have risen exponentially and rent reductions based on professional valuations are unheard of.

Mr Mabea said change in use resulted in the change of the plot’s land reference and insisted that there was nothing suspicious about that.