From billionaires to beggars: The tragic fall of Karume's empire : The Standard

Billionaire Njenga Karume was a meticulous planner who settled all loans before his death, leaving his estate, including the Jacaranda Hotel, debt-free. When he breathed his last on February 24, 2012, there was some Sh300 million that would cover for any unforeseen events and medical bills. Part of the cash, Sh149 million, would be placed in fixed deposit accounts, to help illustrate the opulence for a family that might never live in need. Today, the West African headquartered GT Bank is for the third time trying to auction the Sh2 billion-worth hotel to recover Sh280 million in outstanding loans, penalties and arrears. Lenders provided the cash to refurbish the 42 rooms in Jacaranda Hotel, which is described as “run down” by family members. Mary M’Mukindia, an independent director at the Nigeria-owned GT Bank, sought the loans on behalf of Jacaranda Hotel, where she was also a director. Questions are now arising as to how Karume’s most iconic asset would be attached by lenders, even though in life, Karume had taken loans against the hotel nine times and repaid them all.

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Three days after his death, the last charge against Jacaranda Hotel by a syndicate of KCB and Equity Bank was to unshackle the prime property. Two years into his death, the trustees he entrusted his wealth with trudged on what is turning out a slippery path to the imminent foreclosure of Jacaranda Hotel. Court documents relating to various petitions involving the management of the estate have helped piece together the history of the four-star hotel through its highs and today’s lows. It is a tale of questionable management strategies and possible fraud on a facility that was at the heart of Karume’s vast wealth. Obviously, Jacaranda was significant in building the empire, considering the number of times it has been used as collateral in accessing bank loans. “It is too dear an asset for us to lose because it was the first tangible business which helped mzee to acquire most of his wealth,” Lucy Karume, his daughter, said. “We will do everything it will take to save it. A High Court in Nairobi ordered the trustees to pay Sh4.5 million to GT Bank by today as part of a commitment before another attempt to re-negotiate with the lender on terms of the loan.” It all started on December 4, 1964 when the then Prime Minister, the late Jomo Kenyatta presided over the opening of a French-owned hospitality facility in the proximity of Waiyaki Way. In October 1976, the Kenyatta administration formally granted parcel number I.R22971/6 along what is today Woodvale Close, Westlands, to Agip Kenya. A condition tied to the award was that Agip Kenya would build a motorist hotel, commonly known as motel, where travellers would enjoy food and accommodation, according to the court filings. In less than two years afterwards, and for whatever reasons, Karume acquired it from the oil marketer, which would eventually exit Kenya in 2000. On the same day of transfer in April 1978, the then nominated MP would charge the property to Standard Chartered Bank for an undisclosed amount in a loan. He would continue to use it as security to procure several other loans in 1987, 1991, 1994, 1996, 1997 and 2007. His daughter Lucy says proceeds of the loans were spent on expanding the hotel business, which today include Jacaranda Indian Ocean Resort, Pizza Garden that was renamed The Node, and Elementeita Lodge – which Karume built in the neighbourhood where he was born. It is this heritage which has given Jacaranda Hotel the connection with the wealthy family. Fast forward to 2011 when Karume’s health deteriorated and he was advised by doctors that he had only a few months to live. In the plans after he was gone, he would find a buyer in the Kenyatta University Staff Pension Scheme for a swathe of land near the institution. Payment worth Sh1.127 billion came in three installments, of which Sh609 million was spent to settle bank loans, many procured by the hotel businesses. Karume had in person lent his companies Sh617 million at the time of his death. Unpaid taxes The Kenya Revenue Authority was owed millions in unpaid taxes, too. With the cash balances from the land sale, the trustees spent Sh73 million to buy Karume’s wife a house as the family home, an 18-bedroom mansion, was too big for her to stay alone. Her children were already grown up too. Another Sh60 million was supposedly spent to cover Karume’s medical bills while Sh149 million was placed with a bank in a fixed deposit account.  Two years after his death, his trustees decided to refurbish Jacaranda Hotel. Directors of the hotel business were given the approval to seek funds, and they settled on GT Bank. Lucy holds that the supposed refurbishment never took place. In her argument, the loan was not necessary as there were funds locked in bank accounts. M’Mukindia, the former hotel’s director, was yet to respond to our queries. On September 24, 2014, GT Bank notified the hotel that their application had been considered and extended Sh200 million against the property and a further Sh200 million against the fittings, including electronics and furniture. That would set off a string of borrowings starting with an overdraft facility of Sh50 million in October 2014, Sh100 million in March 2015 and loan restructuring in May 2017. As of August 2017, the loan repayment had long been erratic while GT Bank was owed a total of Sh230 million. By June 2018, the debts had grown to Sh280 million and the bank was already apprehensive, giving notices of attachment of the collateralised property. GT Bank’s outstanding debt was Sh283 million in the latest computation dated January 2, 2020.

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Billionaire Njenga KarumeJacaranda HotelAuctioneers