KQ seeks over Sh2bn in Nairobi prime plot sale

Kenya Airways expects to complete the sale of a 30-acre piece of land in Embakasi in the next two months, a transaction that is expected to fetch more than Sh2 billion.

The cash-hungry national carrier, which reported an Sh11.9 billion after-tax loss in the half year ended September, in January put two parcels of land up for sale seeking to boost its financial position.

Chief executive Mbuvi Ngunze said the company was finalising talks with one bidder with a view of closing the deal within two months.

Lloyd Masika, a valuation and real estate agent, is handling the transaction.

“We are at an aanced stage of negotiations with one serious bidder,” Mr Ngunze said told Business Daily in a recent interview.

“I expect that in the next two months, we shall confidently say that the transaction is completely done.”

KQ invited bids for two parcels of land opposite its training school — a 24.71 acre piece of land that was previously a warehouse yard and another 5.56 acres which is undeveloped.

The two plots in Embakasi are in an area where the market price per acre is between Sh80 million and Sh100 million.

READ: KQ puts Sbn prime Embakasi land up for sale

KQ’s latest annual report indicates that its investment in freehold land and buildings as at March 2015 was valued at Sh5.05 billion, down from Sh7.3 billion posted a year earlier.

The difference of Sh2.2 billion is the expected proceeds from the  Embakasi land which has been recorded in the airline’s books as “reclassified to assets held for sale”.

“As at March 31, the assets held for sale were stated at the lower of fair value less costs to sell and the carrying amount,” KQ states in its 2014-2015 annual report released last month.

This indicates that KQ could end up selling the land for amount higher than Sh2.2 billion since the actual sale value is likely to top the assigned fair value.

The carrier’s move to sell idle property is part of its quest to inject much-needed cash into the business which has now posted losses for the past three-and-a-half years.

The NSE-listed airline’s net loss in the half year had widened from ShSh10.4 billion a year earlier, reflecting the impact of high finance costs, loan re-evaluation losses and flat revenues of Sh56.7 billion.

KQ in July contracted American consultancy firm McKinsey to help implement a restructuring plan which the airline hopes will boost its earnings by about Sh20 billion.

Another Sh14.6 billion is expected from sale of assets, including the sale or leasing of four Boeing 777-200 planes which have since been grounded and proceeds from disposing of the Embakasi land.

“We have placed bids for the four planes in several lease or purchase proposals from across the world. For the four planes, we are looking for an outright sale,” said Mr Mbuvi.

Citigroup early this year noted that the carrier needs to inject additional cash or restructure its capital in order to return to profitability.