Lake Basin could lose Sh4bn mall to Co-op Bank
Yang John-MD Erdemann Properties (left), Anderson Muriithi - Coop Bank Mortgage Department, John Rajuayi - Project Manager Erdemann Properties and Alfred Mutuku - Co-operative Bank Credit Analysis make a tour of the Lake Basin Mall. Lake Basin Development Authority could lose the Sh4.1 billion property to Cooperative Bank after the Treasury and MPs rejected a budget allocation of Sh1.59 billion to repay a loan that fell due at the end of May. PHOTO | WILLIAM OERI | NATION MEDI GROUP
What you need to know:
- Budget and Appropriations Committee chairman Mutava Musyimi said the money will be returned to the Treasury for further negotiations.
- Treasury Cabinet Secretary Mr Henry Rotich distanced himself from a Sh2.5 billion pending bill that arose from the construction of Mall in Kisumu.
- Mr Rotich told the Budget and Appropriations Committee that he cannot clear the payment of the loan whose documentation is not clear.
- The BAC reduced the figure to Sh705 million but dropped it altogether after realising MPs will shoot it down.
The Lake Basin Development Authority (LBDA) could lose its Sh4.1 billion property to Cooperative Bank after the Treasury and MPs rejected a budget allocation of Sh1.59 billion to repay a loan that fell due at the end of May.
The Budget and Appropriations Committee (BAC) beat a hasty retreat and removed the allocation from the national budget following a fierce opposition from Majority leader Aden Duale and Kanduyi MP Wafula Wamunyinyi who claimed the money was going to the pocket of a Chinese contractor.
Committee chairman Mutava Musyimi said the money will be returned to the Treasury for further negotiations after Mr Henry Rotich distanced himself from a Sh2.5 billion pending bill that arose from the construction of Mall in Kisumu.
Mr Rotich had on Wednesday told the BAC that he cannot clear the payment of the loan whose documentation is not clear.
The Finance, Planning and Trade committee had proposed that Sh1.59 billion be availed in the budget to clear part of the Sh2.5 billion that a contractor (Ederman Properties Limited) borrowed using an LBDA title deed to put up a Mall in Kisumu.
The BAC reduced the figure to Sh705 million but dropped it altogether after realising MPs will shoot it down.
Mr Duale threatened to initiate an amendment to transfer the Sh705 million to MPs controlled Constituencies Development Fund where each of the 290 electoral areas will get about Sh2 million. He said the proposed allocation was not requested for by the Environment ministry of LBDA but the Finance committee.
On Friday, the Environment and Natural Resources committee which used to oversight LBDA before it was transferred to the ministry of devolution held an emergency meeting with environment PS Charles Sunkuli and LBDA management to try and salvage the budgetary allocation.
COMMITTEE REPORT SHELVED
The committee that was chaired by Emuhaya MP Wilbur Ottichillo directed Mr Sunkuli to get in touch with Mr Rotich to have the BAC committee report containing changes to the Budget shelved until next Tuesday.
“This matter is now beyond us even if we agree with you that LBDA property should be salvaged from imminent auction. We want you to get your CS to talk to Mr Rotich otherwise LBDA will lose its property to the bank,” Mr Ottichillo said.
Mr Sunkuli said the developer, who initially was to finance, build and transfer the Sh4.1 billion mall through funding from China Exim Bank borrowed a loan of Sh2.5 billion from Cooperative Bank and charged the loan on the title deed of LBDA.
He said the developer was to finance 80 per cent of the project while the government 20 per cent. The developer, who Mr Sunkuli said was not an investor but a mere builder failed to secure the Exim Bank financing owing to the failure by the government to put in its 20 per cent as counterpart funding.
“This forced the so called investor to borrow the money locally using the title deed of LBDA,” he said.
Mr Sunkuli said LBDA board entered into the arrangement to have the developer borrow Sh2.5 billion using its title deed without the involvement of the office of the Attorney General.
The PS gave a breakdown of the total cost of the mall. He said construction costs amounted to Sh3.8 billion, financing cost (Sh550.7 million), professional fees payable to consultants (Sh207 million), development management fees (Sh265.9 million) bringing the total cost to Sh4.14 billion.
He said the mall generates Sh52 million in rental income monthly.
SERVICING INTEREST
“I am under threat of being auctioned and the government will lose Sh390 million that it is part of the 20 per cent (Sh490 million) the Treasury has put in the project. We will be in default if we don’t pay because the contract states that Cooperative Bank will be paid Sh2.5 billion upon handing over of the mall to LBDA,” Earle Ng’ani, the acting LBDA board chairman told MPs.
Mr Ng’ani said the co-developer (Edman Properties Limited) is the borrower of the Sh2.5 billion and has been servicing interest while the principal is scheduled to be paid in bullet installments.
