Broke university to sell city office block over Sh1.7bn Co-op Bank loan
Cash-strapped Kenya Methodist University (KeMu) is seeking to sell a prime office block in Nairobi’s city centre to clear a Co-operative Bank loan, tax and staff dues, highlighting the struggles of private universities as students dwindle.
The university is selling the iconic KeMU Hub on Koinange Street, which hosts its campus for business related degrees.
The building was used as one of the securities for a Sh1.7 billion Co-operative Bank loan, and the university is now seeking the lender’s consent for its sale as it struggles to settle obligations like salaries, tax and supplier payments.
Admission to public universities of nearly all students who scored C+ and above over the past two years has reduced the pool of learners available for private varsities.
This has cut the cash flow of private institutions like Kemu, given the minimum admission to universities was retained at C+.
KeMu vice-chancellor Maurice Oduor Okoth informed Co-operative Bank through a March 14 letter of the need to sell the tower to ease “strained financial position.”
“Upon the sale of this property it is our proposal that we utilise part of the proceeds to clear Sh135 million the Co-operative Bank advanced KeMU in June 2017 and the balance to pay accrued amounts owed to Kenya Revenue Authority, part time lecturers, staff deductions and other creditors,” said Prof Okoth.
He wants Co-operative Bank to release the property given its one of the assets the university had used to secure a long-term loan of Sh1.747 billion.
“In the event the value of the latter (tower) is not adequate to cover the loan, additional security will be provided to enable the release of KeMu Hub for sale,” said Prof Okoth.
The sale of KeMu’s prime office block comes weeks after university regulator threatened the institution with closure on its financial instability.
The Commission for University Education in January proposed the Karen-based Catholic University of Eastern Africa (CUEA) and KeMU be given a year to restructure their operations and get a sound financial footing, failure to which their licences should be revoked.
It recommended that Kenya Universities and Colleges Central Placement Service stop placing government-sponsored students at CUEA, KeMU and Presbyterian University of East Africa (PUEA).
Catholic University of Eastern Africa in January placed its three-floor Kisumu campus property on sale.
Higher admission grades to public universities and the appetite for varsity education created demand that fuelled rapid expansion of the private universities—making them a key player in Kenya’s property market.
Private university students rose from 21,032 in 2008 to 85,195, a 305 per cent increase.