September 29,2018 – Local and regional investors in Rwanda’s iconic hotel development, Ubumwe Grande Hotel, face possible loss running in millions of dollars after their foreign partner, Nepalese dollar billionaire Binod. K Chaudhary abandoned the project.
256BN has learnt that Kenya Commercial Bank Rwanda Limited KCB, the lenders to the project, have issued a notice of intention to recover an outstanding $19 million, from the project in which Chaudhary’s CG Group partly invested.
The loan failed to perform when CG, who had entered into a contract to manage the hotel through their Zinc Hotels brand, failed to meet their obligations, forcing (Acacia Property Developers (APDL) to terminate the contract. CG then commenced arbitration proceedings against APDL, seeking the right to manage the property. Although they won that round of arbitration, CG Group never turned up in Kigali to assume responsibility
Privileged sources in Kigali say although servicing the loan had lapsed sometime back, KCB was not overly alarmed because the failure was not related to Ubumwe’s business performance but shareholder issues.
“But the bank cannot hold off any longer because regulations require them to make a provision for the debt, hence the decision to move on the property,” says one source.
Ubumwe is owned by Acacia Property Developers Limited APDL, a joint venture company owned by three separate companies. Eighty percent of the stock is owned by Zinc Africa Hospitality Ventures ZAHV, a special purpose vehicle registered in Singapore while the minority stake is owned by Kigali Real Estate. A local Rwandan company. ZAHV is owned in equal amounts by African Eagle Limited and CG Group, records at the Rwandan registrar of companies show.
Group is understood to have invested around $5.5 million before it stopped making any more contributions. Kigali Real Estate is said to have stepped in to bridge the gap created by CG’s abscondment.
Under the original arrangement, APDL would develop the hotel and hand it over to Chaudhary’s Zinc Hotels for management. CG registered a local subsidiary in Rwanda, Zinc Hotels and Resorts Kigali Limited to represent it in the management contract. But Zinc turned out to be a total disappointment after it subcontracted other groups to manage the property. Ultimately, Zinc Hotels failed to take off and the property was rebranded as Ubumwe Grande Hotel. APDL and Kigali Real Estate stepped in to operate the hotel since 2016.
According to available information, trouble for the project started around March 2016, three months before the hotel’s scheduled opening when CG shifted goalposts to bring in companies other than Zinc. These delegates failed within weeks because they did not have any experience in running a hotel anywhere in Africa under any brand including Zinc.
“You can imagine the crisis this created since CG’s company quit just three months to the scheduled opening of the hotel,” one of our sources says.
It is then that APDL was forced take over management of the hotel. Internally, CG refused to accept responsibility and spurned any offers of a settlement. This forced APDL to terminate the contract with ZHRK in May 2016.
Angered by this development, CG commenced arbitration proceedings against their partner African Eagle Limited, while Zinc Hotels and Resorts Kigali also opened parallel arbitration proceedings against the hotel owning company APDL.
Sources add that on multiple occasions the lenders –KCB- have called meetings to help the partners agree a way forward but CG did not turn up.
It is understood that, another round of international arbitration, is now scheduled later in 2018 but this might be too little too late to save Ubumwe Grande Hotel from foreclosure by the lenders.