Cytonn assets set for auction to recover Sh11 billion for investors

Kenyan government has opened a bidding on multi-billion-shilling real estate assets tied to failed Cytonn Investments vehicles, marking a significant step toward recovering more than KSh11 billion owed to over 3,000 retail investors.

The Business Registration Services, acting through the Official Receiver in Insolvency, is seeking eligible bids for properties linked to Cytonn High Yield Solutions and Cytonn Real Estate Project Notes. Both entities were placed under liquidation on 6 January 2023, after defaulting on interest payments to investors.

Court of Appeal clears path for asset sales

The auction follows the dismissal of all 19 appeals by Cytonn-linked parties challenging the liquidation. In November last year, the Court of Appeal upheld High Court decisions, rejecting arguments that special purpose vehicles holding the properties operated independently from Cytonn Investments Management PLC.

Judges described the financial arrangements as “a scheme akin to fraud,” while stressing the need to protect the interests of thousands of ordinary Kenyans who entrusted their savings to the funds. The three-judge bench ruled that “the balance of convenience tilts overwhelmingly in favour of allowing the liquidation process to reach its natural conclusion.”

The Official Receiver’s tender notice invites bids for the disposal of the assets, exercising powers under Section 703 of the Insolvency Act. The Office of the Official Receiver operates under the BRS, a semi-autonomous agency within the Office of the Attorney-General and Department of Justice.

Prime properties across Nairobi and environs up for bids

Assets slated for auction include several high-value developments in and around the capital, with collective valuations running into billions of shillings. Key properties and their approximate values are:

• Kilimani — KSh1.73 billion
• The Alma (Ruaka) — KSh1.43 billion
• Riverrun project — KSh535.8 million
• Amara Ridge — KSh502.8 million
• Superior Homes — KSh383.9 million
• Ridge — KSh331 million
• Another Riverrun component — KSh295.9 million
• Athi River land — KSh236 million
• Cysuites (Westlands) — KSh187 million
• Newtown Mystic Plains — KSh60.5 million
• Taraji Heights — KSh53.8 million
• Applewood Miotoni (and additional parcels)

Full details of the tender and bidding process are available through official Business Registration Services channels.

Origins of Cytonn financial collapse

Cytonn Investments, founded in 2014 by Edwin Dande and partners, gained popularity by offering residential and mixed-use real estate projects to retail and institutional investors. The firm structured products through Cytonn High Yield Solutions and Cytonn Real Estate Project Notes, which pooled funds and channeled them to 17 special purpose vehicles for property acquisition and development.

Trouble surfaced publicly in 2021 when promoters petitioned the court for administration, admitting inability to meet obligations. Company records showed Dande as the principal partner in nearly all special purpose vehicles, undermining claims of genuine separation between the investment vehicles and the operating company.

Courts traced more than KSh11 billion in investor funds flowing from CHYS and CPN into the SPVs, which were ultimately deemed inextricably linked to Cytonn Investments Management PLC. The High Court and Court of Appeal both found the structure favored promoters at the expense of retail investors, many of whom were ordinary Kenyans seeking returns on life savings.

The sale represents the latest phase in a lengthy insolvency process aimed at maximizing recoveries for creditors. Investors who filed proofs of debt with the Official Receiver stand to benefit as proceeds are distributed according to statutory priorities under the Insolvency Act.

The development comes amid broader scrutiny of unregulated high-yield investment schemes in Kenya’s real estate sector. For the thousands affected, the opening of bids offers a measure of closure after years of legal battles and delayed returns.