Ubumwe Grande Hotel has defaulted $18m KCB bank loan.
While the developers declined to comment on the issue, sources place the blame on Nepal-based trading outfit Chaudary Group (CG) owned by millionaire B.K. Chaudary, which failed to fulfil its obligations under a complex three-way partnership that birthed APDL, the Rwandan holding company that owns the hotel.
Rwanda’s signature hotel development, Ubumwe Grande Hotel, risks liquidation as KCB Rwanda seeks to recover a $19 million outstanding loan.
KCB Rwanda managing director George Odhiambo said the bank has issued a notice of intention to foreclose on the facility after Ubumwe’s developers failed to service the loan, whose value he puts at “slightly above $18 million.
“We have issued a final demand and a notification to Rwanda Development Board. So from there, we will be seeking permission to proceed,” Mr Odhiambo told The EastAfrican.
This means that the RDB has the option to appoint auctioneers to carry out valuation of the property and advertise a date for auction.
The second option is for RDB to appoint a receiver manager to run the business. Acacia Property Developers Ltd (APDL), the owners of the property, have also apparently been put on notice by KCB Rwanda, that the bank will be seeking full recovery of the outstanding sum or else it will put the hotel on the market.
“We are in a situation where the servicing of the credit facility must happen and if it doesn’t then we must recoup the investors’ money,” said Mr Odhiambo.
While the developers declined to comment on the issue, sources place the blame on Nepal-based trading outfit Chaudary Group (CG) owned by millionaire B.K. Chaudary, which failed to fulfil its obligations under a complex three-way partnership that birthed APDL, the Rwandan holding company that owns the hotel.
According to filings at companies registry, APDL is 80 per cent owned by Zinc Africa Hospitality Ventures (ZAHV) and 20 per cent by Kigali Real Estate (KRE) Ltd, a Rwandan company. ZAHV is a special purpose vehicle registered in Singapore, in which African Eagle Ltd (AEL) and CG Group hold equal stake.
According to sources, CG Group contributed $5.5 million to the construction of the multimillion-dollar property while the $19 million was borrowed and the rest contributed by AEL and KRE. Under the shareholders’ agreement, APDL would develop the hotel but it would be managed by CG Group under its Zinc Hotels brand.
CG registered Zinc Hotels Kigali to represent it in the management contract. But the Zinc brand never went into operation and APDL and Kigali Real Estate, the minority shareholder, have been managing the business since its opening in mid-2016.
According to legal sources in Kigali, who have been following the dispute, trouble started early in 2016 when CG began to “abscond” on their obligations as the property was nearing completion.
Rather than bring in a management team as they had promised, CG subcontracted other companies to manage the hotel. The subcontractors allegedly failed to perform, putting the project in jeopardy.
These companies had no experience anywhere in Africa, so they soon ran into problems and KRE the local shareholder took most of the responsibility, says one source.
One of the companies also abruptly terminated its subcontract with CG, three months to the scheduled opening of the hotel, once again throwing the plans into disarray.
Under pressure to deliver the project in time for the African Union Summit that Rwanda was hosting in July 2016, APDL had to take on the challenge with support from KRE to manage the hotel. During a shareholders’ meeting, CG reportedly rejected all propositions offered by the other shareholders to resolve the matter.
