KCB to take over Kilimani apartments in Sh2bn row

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KCB Bank has been allowed to place apartment blocks owned by Northcote Business Centre under administration to recover defaulted $16 million (Sh2 billion) loans.

Northcote borrowed the sums from National Bank of Kenya and are part of the loan portfolio that KCB inherited after acquiring National Bank in October, 2019.

KCB appointed an administrator on December 4, 2025 who took possession of the apartments on December 16, 2025.

In court papers, KCB said it placed Northcote under administration after establishing that the real estate firm violated an agreement to deposit rent and sale proceeds in an escrow account held by the two parties.

Instead, KCB held in court that Northcote diverted sales and rent proceeds for several units to an account the real estate firm operates at Absa Bank.

Northcote insisted that the rental and sales proceeds were all channeled to construction and “project-related obligations which benefited the lender”. In court, Northcote did not deny defaulting on the loan.

KCB filed an insolvency petition seeking to enforce its right to appoint an administrator as per the loan agreements with Northcote. The real estate firm then filed applications seeking to block KCB’s appointment of an administrator.

The High Court has now ruled that KCB acted within its rights as a lender, and that it would be risky to block the administration and return control of the apartment blocks to the same directors and management who triggered the lender’s takeover of the Kilimani property.

“The balance of convenience also favours preserving the statutory administration process rather than returning control to the very management whose conduct gave rise to the lender's decision to invoke its security rights. The Applicants (Northcote Business Centre Ltd) have therefore failed to satisfy the requirements for the grant of an injunction,” the High Court ruled.

KCB’s lawyer told the court that Northcote had defaulted on the loan several times.

The bank added that Northcote had an existing overdraft of $3.314 million (Sh427 million) in its National Bank of Kenya account at the time KCB came into the picture.

On July 25, 2022, the two parties signed a deed of assignment, in which it was agreed that the rental and sales proceeds would be deposited in an escrow account in the joint names of KCB and Northcote.

At the same time in 2025, Northcote provided KCB with an all-assets debenture, meaning that substantially all present and future assets of the real estate firm are security for the Sh2 billion loans.

The escrow account was intended to facilitate a revenue-sharing formula which would allow KCB to recover the loan, but leave Northcote with enough funds to ensure business continuity.

Northcote in its court papers argued that it had deposited all rental and sales proceeds in the escrow account, and claimed that since the appointment of the administrator, sales and tenant occupancy have slowed down.

The real estate firm had claimed that it had suffered irreparable loss since the appointment of the administrator.

But the court held that the Sh2 billion debt is undisputed, and that the losses Northcote had listed can be calculated; hence, the real estate firm can be compensated through a financial award in the event it is determined that KCB is at fault.

Northcote claimed that it sought clarification on its obligations after KCB acquired National Bank of Kenya, and that it did not receive any response other than the appointment of an administrator.

The real estate firm argued that KCB could not rely on assets charged to National Bank of Kenya, including the apartments, to recover the loans.

But the court agreed with KCB that the lender acquired all assets and liabilities of National Bank of Kenya. That, the court held, meant that KCB also acquired the rights and obligations previously held by National Bank of Kenya.

The court dismissed Northcote’s argument that it is not insolvent, hence should not be placed under administration. The court held that administration exists to avoid total collapse, for the sake of stakeholders, in the event that a firm is under great financial distress.

“While there is evidence that the company continued to own valuable assets and derive rental income, insolvency for purposes of administration is not confined to complete cessation of business operations or total financial collapse. The administration regime exists precisely to address situations where a company is experiencing financial distress while efforts are made to preserve value for creditors and stakeholders,” the court ruled.

Reporting originally appeared via Business Daily. Read the full source for additional context.