Two city hotels auctioned on BRD debt | New times

Two popular Kigali hotels are being auctioned for debts owed to the Development Bank of Rwanda (BRD). The two properties are The Mirror Hotel in Kisementi and Hotel Villa Portofino in Nyarutarama.

Both properties are listed on “cyamunara.gov.rw», The electronic auction system for guarantees following the approval of sales by the Registrar General.

New times understands that the arrears that led to the auction accumulated before the Covid-19 pandemic but the economic downturn could have dashed any hope of recovery.

The amount of money owed by each of the hotels was not readily available at press time.

Hotel insolvency follows earlier concerns about non-performing loans raised by the Central Bank and financial sector players, which were most prevalent in hotels even before the pandemic.

The Mirror was the first to be auctioned for unpaid debts to BRD. The property was auctioned off in July this year after attempts by stakeholders to find other ways to collect the arrears failed.

A source with an overview of the property’s auction said New times that before the auction initially scheduled for 2020, the bank and the registrar general had studied other avenues such as receivership which did not materialize.

Among the options they explored was putting the property under management to recover the amounts owed, but this could not take off.

The Mirror Hotel is a three star hotel located near the busy Kisementi junction and has been operational for approximately 6 years. According to an auction notice, the property is valued at around 3.9 billion Rwf and sits on a 1,765 square meter plot considered to be a prime location.

Vedaste Habimana, the appointed auctioneer, said anyone intending to participate in the auction will be required to deposit into the Justice Department’s account a refundable equivalent of 5 percent of the property’s value. .

According to him, this is a measure taken by the government to ward off fraudsters and, in the event of an unsuccessful offer, the money is returned to the owner.

Hotel Villa Portofino is located along Nyarutarama-Kagugu road and is also classified as a three star hotel worth Frw 5.4 billion.

It covers 5,230 square meters and its auction is supervised by Anne Murerwa.

According to her, serious bidders will also have to deposit around 269 million Rwf, which is equivalent to 5 percent of the property’s value.

The establishment signed a hotel management agreement with Swiss International Hotels and Resorts in 2016, but the partnership did not last and the establishment was handed over to its management.

The 51-room establishment was opened around 2014.

The BRD’s annual report for 2020 noted that net write-downs on loans in 2020 increased by 77% due to uncertainties in customer affairs that led to loan restructuring.

However, the auctions could not be completed in 2020 because the recovery process was interrupted by the suspension of the auction process by the office of the Registrar General.

The auction of two properties follows another, the Karisimbi Hotel located in the affluent Kiyovu neighborhood in the Nyarugenge district, which has been on the market for about three years following insolvency after being unable to pay a certain number of creditors.

Creditors include BRD, Rwanda Revenue Authority, Rwanda Social Security Board, Banque Populaire du Rwanda (BPR) and Nyarugenge district.

The creditors seek to recover nearly 2 billion Rwf on the assets.

In May 2021, the ratio of non-performing loans in the hotel sector increased to 10.9%.

Hotel insolvency has been explained by large borrowing by industry players without an adequate understanding of business prospects and trends in the hospitality industry.

Around 2013 and 2014, a number of local investors took out loans to join the hospitality sector, expecting significant growth rates in the sector. For some, returns have not been as expected, leading them to default on their loans.

Following the pandemic, the government launched the economic stimulus fund in which Rwf 50 billion was set aside for hotel refinancing in order to restructure 35% of the hotel sector’s total outstanding performing loans which s amounted to Rwf 134 billion for 571 borrowers at the end of February 2020.

cmwai@newtimesrwanda.com

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Kevin T. McElroy

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