Last week, the Kenyan High Court ordered the liquidation of Cytonn Investments Plc to recover monies to pay investors.
The investors had put their monies into the then lucrative and best-performing Cytonn High Yield Solutions (CHYS).
However, by the time the hammer fell in court and the judge issued the order to liquidate the company to recover Sh14 billion of client funds, the signs were there all along that trouble was looming for Cytonn.
“The court must be sensitive and alive to the plight of over 3,000 members of the public who sank their over Sh11 billion and 886 others whose over Sh4 billion was sunk into these projects and therefore lean towards a lesser evil, which is to preserve those assets for the time being,” Justice Alfred Mabeya stated.
The judge also ordered that distinct Cytonn properties must be preserved until the liquidation is concluded.
Among those mentioned, high end the ‘Alma, Applewood/Miotoni, Riverrun, Ridge and Taraji’.
Troubled by constant investor jitters, some that ended up in court, Cytonn moved to the same seeking to be placed under administration to protect itself from collapse.
It was too late, of the 866 clients that had given them over Sh14 billion, Cytonn only had Sh4.2 billion to spare across its functions.
As early as 2017, reports emerged online that Cytonn was ‘having issues’.
The issues were not only of monetary nature but more dire, investors read how the company rushed some housing units to the point that they had structural issues.
”The Alma has been having issues and at some point, they had to do remedial works on some blocks just to try and fix some serious structural screw-ups. The QA/QC manager even resigned as he couldn’t stand and watch what was happening. CATIC has had some issues with the safety of employees and at some point, the employees downed their tools,” online sources quoted.
Though the project was completed and the nicely built houses were given to some investors, the damage had already been done.
It is not easy to get the idea that clients were going to live in substandard houses with good PR on the outside.
Apart from The Alam, other Cytonn projects such as Taraji Heights and Amara Ridge also faced similar bad publicity.
It was not just publicity, it was the feeling on the ground and online.
These matters were not helped by the constant barrage of complaints and criticism online over other housing projects.
Suraya was collapsing and a cemetery of other housing firms did not give investors confidence to believe even in Cytonn.
Then came the Covid-19 pandemic which destroyed Cytonn like no one could imagine.
Coupled with a government that was also rogue to the firm, for whatever reason, Cytonn started receiving bad publicity in the mainstream media.
Its CEO Edwin Dande had to build a well-maintained PR team but they were no match for the government.
As soon as it was evident Cytonn was doing good using its marketing network, the Capital Markets Authority (CMA) played mischief by calling them out unexpectedly.
It was playing out in the gallery where investors, both long-term and short-term, were watching the events unfold.
In an industry full of similar offerings, it was not okay what CMA did to Cytonn by calling their offerings ‘unregistered’.
To the seasoned investors, they knew that Dande had touched the tigers behind and he was being roasted for it. There were half truths from CMA.
The ups and downs of previous years were membered by the short term investors and it was enough to being a company down.
In July 2018, Edwin Dande had to defend himself and his company against accusations that most of his projects were just on paper and will never see the light of day.
“The assertion that most of the projects are just on paper and will never kick off is inaccurate. The 10 real estate development projects are each at different stages of the development cycle, which begins all the way from research and land origination, to construction, and finally to sales and facilities management,” read the statement from Cytonn, in part.
Some of the projects have been completed at a great cost and in the midst of a pandemic where everyone is on edge as to the direction of the economy.
The target of the complaints was The Alma, The Ridge, Amara Ridge, Newtown, Cytonn Towers and Applewood.
The naysayers’ predictions have come true for some of the above.
Perhaps the single most issue that Dande and Cytonn never captured, so as to plan well, is the many housing projects that people in the former regime were eyeing.
In Nothern Nairobi, a Northlands City is coming up.
In the same vicinity, Tatu City’s construction is ongoing.
The two investments did not want any competition and were very critical of any other and would go to great lengths to stop any competition.
Northlands on its part had 100 per cent state backing and any other housing projects, be it the Big Four, Tatu City and Konza City wouldn’t be let to stand any chance.
These issues and what other the state knew were used to arm-twist and make it possible for Cytonn to collapse.
In their 2017 financial statement, Cytonn admitted to having liabilities more than assets.
“We draw attention to the fact that as at December 31, 2017, the Group had an excess of current liabilities over current assets of KSh2,869,864,147 (2016: Ksh 1,461,166,474),” the company wrote in an effort at transparency.
The controversial exit from Britam Insurance by top managers at Cytonn was also at play.
In 2015, Cytonn dropped a Sh40 billion deal it signed with Acorn Group in October 2014.
It was Britam Insurance’s way of paying back for Cytonn stealing its business idea.
It is from this breakup that Cytonn started its journey in Real Estate and announced the Amara Ridge housing development in Karen.
“Our only interest there (in the Acorn deal) was to finance it but if it is creating problems, we decided it’s best we create our own real estate arm,” Cytonn’s managing director Edwin Dande told The Star.
Cytonn Real Estate has announced a Sh50 billion property deal pipeline with main focus on gated communities and high density mixed-use developments, mainly targeting low to middle income segments. CRE’s first project, Cytonn Group announced, will be construction of a gated community in Karen dubbed Amara Ridge. Dande said groundbreaking for the project is slated for August 2015.
It was further reported that out of the Sh50 billion Cytonn wants to raise for its property projects, Sh30 billion will be raised via bank debt, Sh10 billion from mezannine financing- which is a mix of debt and equity- while Sh10 billion will be obtained from global and local investors seeking to partner with Cytonn.
Fast forward to 2022, investors had become wary of the delays in project completion, bad reviews online and an angry management that was keen on gagging anyone including with court cases, that dared speak ill of Cytonn.
It was clear that the Pandemic was the last straw that broke the camel’s back.
Some investors reported the firm over defaulting on Sh122 million payment.
Slightly above a dozen investors claimed that Cytonn had delayed payments of between Sh500,000 and Sh25 million.
They asked CMA and courts to bar Cytonn from putting more cash in real estate projects.
CMA responded by raising concerns over two funds offerd by Cytonn; that is Cytonn High Yield Solutions (CHYS) — and debt security raised from investors dubbed Cytonn Project Notes pose risks to investing public.
Government moved into action but some of its tactics bordered on harassment.
“The risk of default has started crystallising,” Mr Abubakar Hassan Head of Investigation & Enforcement at CMA said in an affidavit in support of the investors.
Cytonn protested that it had pumped Sh96 million into Alma and Applewood and the CMA order may trigger a run on its investment and possible collapse.
In 2019, Cytonn’s sworn enemy Britam, under the leadership of the long serving CEO Benson Wairegi.
It was in 2019, that some people learnt about the happenings of before 2015 and how Cytonn was founded.
Cytonn CEO Dande had responded to Britam Director Marketing and Corporate Affairs Muthoga Ngera’s by stating firmly that his former employer Britam, must not involve him in their failures.
Britam was struggling to sustain itself in the housing market.
“We are not selling land, what has happened, there are some properties one or two. You remember we had this matter of Cytonn and the other guys, there were properties that were bought that we thought we needed to release the capital. It is not many, just some properties somewhere at Lukenya and a property here at Upper Hill,” Affairs Muthoga Ngera had said.
“Please do not blame Cytonn for your troubles at Britam. You are well aware that your selling of properties has nothing to do with Cytonn or any of its employees or associates. Since leaving Britam, we have delivered Amara Ridge in Karen – it is 100% sold and occupied. This month we are delivering CySuites serviced apartments in Westlands and the Alma in Ruaka, where Phase 1 is 96% sold. You are selling properties because you lack development talent and capability, and even if you were to blame your former employees, surely by the time you were building Britam Centre in the 90’s, one of the properties you are selling, I was in high school… how can you blame us for it,” Dande responded.
Britam was truly selling off some of its properties.
Before Cytonn was formed, the founders were staff of Britam.
Motivated and hungry for success, they upstaged Britam’s bureaucracy and slow process to get into the real estate industry by jumping ship unceremoniously.
The four, Edwin Dande, Patricia Wanjama, Elizabeth Nkukuu and Shiv Arora, left Briam.
Edwin Dande and Shiv Arora’s names have featured more in the Real Estate circles.
But Wairegi’s vow to ‘teach them a lesson’ and ‘destroy their lives’ after they left him with an empty Britam real estate unit, might have come true for one.
Edwin Dande’s woes in the hands of govt seem forever.
On the other hand, Shiv Arora’s time in the sun still shines, or is it for a time?
Mr Arora is the CEO of Superior Homes, a company that Cytonn has invested.
Superior Homes continues to build houses and appears to not have any financial problems.
By accusing them of theft, Wairegi was mudding the water for the new whales of the industry.
There was one way to kill competition from Cytonn, accuse them of theft. Britam launched a full-scale assault by filing seven different suits claiming up to Ksh9.8 billion had been stolen funds. The company filed a complaint with the police, claiming the four had illegally transferred Ksh3.9 billion to bank accounts affiliated to Arcon, a real estate developer in which, interestingly, Britam has a stake, online reports claim.
“The aim was to waste time for the four in court, litigating. Britam wanted to scare away investors for Cytonn as there was not cause for investigation or a court case,” says our source.
Even as we enter the sunset years of Cytonn Investments Plc, this circle of firm’s collapse in the housing sector has become rampant and without any good regulations, harassment and knee-jerk reactions from the government and ignorant investors, it appears the heists will continue.
Covering news about Eastlands especially Umoja, Kayole and Buruburu estates