Retail chain Uchumi Supermarkets has changed tack on its ongoing sale of assets, preferring to only dispose part of the land on which the flagship Ngong Road branch is built and part-lease the Lang’ata Hyper store.
Uchumi attributed the changes to low offers for the Lang’ata branch adding that the investor who wanted to purchase the Ngong Hyper property was unwilling to lease it back to them as they had planned.
Uchumi last year got an approval from the Capital Markets Authority (CMA) to sell the two properties as the cash-strapped retailer stepped up efforts to raise funds to pay suppliers and finance operations.
“Originally, we wanted to do a sale and leaseback. But the kind of offers we were getting, the person wanted to do the same kind of business we wanted to do,” said Uchumi chief executive Julius Kipng’etich during the company’s annual general meeting on Wednesday.
The Ngong Hyper land is 2.5 acres with the store sitting on half of it. The Langata store is built on 3.5 acres.
“The board in its wisdom revised the decision and decided to sacrifice the car park and sell that. And then, we retain our shop and open our underground parking, which we don’t use now, to compensate for the lost parking area.”
The Uchumi boss attributed low price offers for Langata Hyper to the fact that the land is next to the Wilson Airport runway, which does not allow for construction of tall buildings.
Mr Kipng’etich said the retailer is considering renting part of the store to an airline for use as a hangar, while the other space will be used as a store.
At the same time a court case on the retailer’s 20-acre piece of land in Kasarani has been settled, paving the way for its sale. Mr Kipng’etich was last year quoted saying that Thika Road Mall (TRM) owners had expressed interest in acquiring the piece of land at Sh3 billion.
Uchumi shareholders also approved a plan to source investors to inject Sh5 billion into the business that is seeking to reverse a Sh3.2 billion loss for the year to June 2015. About Sh1 billion of this loss is blamed on alleged cooking of books by the previous management.
The go-ahead will see the company issue one billion new ordinary shares at a cost of Sh5 each. Two billion shillings of these funds will be used to settle expensive bank loans and a similar amount used to pay outstanding supplier debts.
The remaining money will be used to fund a turnaround plan that involves opening 1,000 mini-shops and 200 express shops under a franchise model.
“With the franchisees, our footprint changes overnight- we’ll be in every county, we’ll be in every major shopping centre in Kenya by adopting an existing shop and just supplying to it,” said Mr Kipng’etich.
“We are also going to adopt the consignment model- the goods are yours until sold. So, we de-risk Uchumi from that. With that, the cost of expansion is minimised.”
