Moi allies demand end to InterCon hotel business

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Moi allies demand end to InterCon hotel business


InterContinental Hotel. FILE PHOTO | NMG

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Summary

  • Kenya Hotel Properties (KHP) is seeking a consultant to advise on the change in business model of the hotel, which closed permanently in August last year.
  • It is also open for sale or lease of the InterContinental hotel building to the government, which has several buildings nearby including the Houses of Parliament, KICC and Sheria House.
  • The permanent closure and the decision of the global chain InterContinental Hotels Group (IHG) to stop operating the Nairobi hotel has devalued its value.

Owners of the InterContinental hotel, including allies of former President Daniel arap Moi, are considering renting the building or converting it to a mixed-use property, complicating the state’s effort to sell its 33-year stake. .8% in the five-star hotel.

Kenya Hotel Properties (KHP) is seeking a consultant to advise on changing the business model of the hotel, which closed permanently in August last year, to include a mixed-use approach – noting that the building of the hotel could be converted into office buildings, shops and mini-hotels.

It is also open for sale or lease of the InterContinental hotel building to the government, which has several buildings nearby including the Houses of Parliament, KICC and Sheria House.

The permanent closure and the decision of the global chain InterContinental Hotels Group (IHG) to stop operating the Nairobi hotel has devalued its value.

“Define the various strategic options available for the corporate premises and adjacent parking silo to reallocate ownership to ensure maximum return on investment,” KHP said in a consultancy notice.

“Consider and evaluate a mixed-use space approach and the associated advantages and disadvantages.”

It indicates KHP is keen to earn rental fees from the 389-room InterContinental hotel, the sale of which to the government’s stake has dragged on for more than a decade.

An investment banker close to the Moi-linked sovereign group told Business Daily earlier that the firm had little incentive to buy the government’s stake amid the crisis in the travel sector and the exit of the partner. anchor, IHG.

“There is little value for Sovereign to run the hotel. The land where the hotel is located is more important compared to the hotel,” said the investment banker who asked not to be identified.

The Privatization Commission was due to start talks with Sovereign Group to buy the government’s stake in the hotel.

But the commission, which is in charge of the sale of government enterprises, regrets that it has not yet received offers from local or foreign buyers wishing to acquire the stake in the hotel, which closed in August at the latest. strong from the Covid-19 crisis.

Sovereign Group is the largest individual local investor in the hotel with a 19.2% stake while Development Bank of Kenya holds a 12.99% stake.

Joshua Kulei, former private secretary to former President Moi, Rodger Kacou and Ahmed Jibril hold a combined stake of less than one percent in the company.

The Intercontinental Hotels Corporation group, which is listed in both the United Kingdom and the United States, holds a 33.8% stake in the hotel group.

InterContinental Hotel announced plans in August to end its rental contracts with KHP, the five-star hotel’s holding company, and close the property amid the economic fallout from the coronavirus.

This had made Sovereign Group the likely candidate to acquire the 33.8% stake before the sale to outsiders.

The InterContinental Hotels Corporation has operated and operated the 389-room InterContinental Nairobi hotel under a 99-year lease since April 1967.

Kenya lost more than 100 billion shillings in tourism revenue last year when the number of foreign visitors fell by two-thirds due to Covid-19.

The sector brought in the equivalent of 163.5 billion shillings in 2018, and the government had originally forecast that figure to increase by 1% in 2020.

Analysts predict that global travel will take more than three years to recover, reducing investors’ appetite for expansion in the sector.

In addition to the effects of Covid-19 on the hospitality industry, KHP is concerned about the impact of property developments near the InterContinental building, including the Nairobi highway and the soon to be opened bus park.

He wants the consultant to consider whether the building could be used by the government, signaling his openness to the sale or lease of the hotel building to the state.

“The analysis should review and advise on potential strategic reassessments of hospitality and commercial real estate for use by government and the private sector,” the KHP advisory reads.

The exit from InterContinental Hotels Group came amid financial difficulties at the Nairobi plant.

The InterContinental hotel was already in trouble before the pandemic and was declared technically insolvent last year because it could not repay its debts which amounted to 717 million shillings. The debt was owed to Stanbic Bank.

Discussions over a transfer of ownership of the hotel began in August 2011 when then-President Mwai Kibaki’s cabinet gave the go-ahead for the sale of the Tourism Finance Corporation (TFC) stake with right pre-emption to existing shareholders.

TFC, formerly known as the Kenya Tourist Development Corporation, was offloading the shares as part of an exercise to transfer state-owned companies, including underperforming sugar mills, to the private sector.

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