Uchumi revival plan hit by KAA’s claim to Langata Hyper land

Retail chain Uchumi’s recovery plan Thursday ran into strong headwinds after a government agency, the Kenya Airports Authority (KAA), claimed it owns the land on which the supermarket’s Lang’ata Hyper stands.

Uchumi announced in September that it was placing the mega shop on sale as part of the effort to raise money it needs to finance its flagging operations but the KAA said in a notice that the land, which is located at Nairobi’s Wilson Airport, belongs to it and cannot be sold without its involvement.

Uchumi dismissed the KAA’s claim as lacking a legal basis, insisting that it holds the relevant titles for the land.  “Uchumi Supermarkets Limited holds a valid title to the parcel of land in question,” said Julius Kipng’etich, Uchumi’s chief executive officer, adding that the retail chain has in the past transacted using that title without any objections. “We have official confirmation from the National Land Commission as to the validity of the title.”

Uchumi used to the title for the land, which measures about 3.7 acres, to secure a S00 million loan from Industrial and Commercial Development Corporation (ICDC) in September 2013.

ICDC, which owns a minority stake in the retail chain, was to receive quarterly repayments for the loan at an interest of 16 per cent over three years without a moratorium period.

The KAA had in 2004 attempted to have the shop demolished as it sought to recover some 2,500 acres of airport land it claimed was illegally allocated to third parties across the country.
The agency further claims that the supermarket sits on Wilson Airport’s flight path, posing a security risk.

“It has come to the attention of KAA, the proprietors of the (land), that a company namely Uchumi Supermarkets, who purports to own the land is trying to sell, lease or deal in one way or another with the land,” Yatich Kangugo, KAA’s acting managing director, said in a notice, warning that any person involved in the deal without its involvement would do so at their own peril.

Uchumi said it has a 99-year lease on the land running from May 1995 and included it as one of its assets in the 2014 rights issue information memorandum, adding that all land rates and rent for the property had been paid in full.

The KAA’s renewed fight for the land signals that it will take long, if at all, for Uchumi to conclude a sale agreement it had reached with private investors as part of the efforts to raise money for its recovery programme.

Unclear circumstances

The disagreement has revived a protracted ownership battle, which began in May 1995 when a company called Fendi Investments bought the land from the government in unclear circumstances and sold it to Uchumi in October 1996.

Three years later, in November 1999, Uchumi wrote to the KAA informing them of plans to build a supermarket on the plot which is located between Uhuru Gardens and Wilson Airport.

The KAA rejected the request, saying that land plan documents at the registry showed it was the property of the authority and that the sale was irregular and void.
The KAA said the plot was on a flight path (hence would pose a security risk if developed) and that it was part of the 2,500 acres of airport land that had been grabbed across the country.

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Kennedy Thairu, the then Uchumi managing director, in August 2000 wrote to the Directorate of Civil Aviation (now Kenya Civil Aviation Authority) asking for its intervention on the matter but this request fell on deaf ears.

“Uchumi cannot make an investment of this nature without following the law,” said Mr Thairu, adding that the retailer, which is under 24-hour protection, posed a less serious security threat than the open grounds at Uhuru Gardens.

The KAA appeared to have had a change of heart in December of that year and gave the retailer the green light to build a store on the land on condition that the aviation authority sanctioned the project.

Chris Kutto, the DCA director-general, approved the plan with a rider that the retailer does not ring-fence the property, builds an underground parking lot and agrees to a height limit on the building.

Uchumi, however, built a basement parking lot and another aboveground, complete with a fence around it.
The KAA reignited its claim to the land nearly a decade later that appears to be the basis of the current fight.

In 2004, the then KAA managing director George Muhoho wrote to the Presidential Commission of Inquiry into IllegalIrregular Allocation of Public Lands demanding that the land be returned to the agency.

The authority also demanded the return of land it said had been hived off the Jomo Kenyatta International Airport, Moi International Airport in Mombasa as well as its airfields in Ukunda, Malindi.

Some of the land records, however, disappeared from the registry while others, whose title deeds still bore the KAA’s name, were found to be registered in the name of the Ministry of Lands and Settlement.

Security concerns about the Langata Hyper’s location revolved around it being on the approach funnel of the runway, putting hundreds of shoppers in harm’s way in the event of an accident during take-off or landing.

Remained muted

A parking space located aboveground, it was argued, would also make it easy for terrorists to launch attacks on landing aircraft.

The land tussle has remained muted over the years and has only resurfaced after Uchumi received regulatory approval to sell the outlet as part of a debt settlement plan meant to put the troubled firm back on track.

Uchumi is also selling its flagship Ngong Hyper outlet and the disputed Lang’ata branch through open tendering whose bidding process was expected to close on October 30, 2015.

“The Capital Markets Authority has given approval for the transactions to proceed subject to ratification by Uchumi shareholders at an annual general meeting,” said the retail chain in a statement announcing the sale plans.

Uchumi has relied heavily on borrowing from commercial banks to finance its operations after years of loss-making, which has also seen its debt to suppliers stack up.
To revive its business, the NSE-listed firm sacked its former chief executive Jonathan Ciano, announced plans to sell its non-core assets and wound up its regional business.

Opposition to the Lang’ata branch sale throws the retailer’s recovery plans into disarray and leaves ICDC at risk of losing its money if the title deed it relied on to aance the loan in 2013 is proved worthless.