Claims of gun drama and title deed row in Cytonn liquidation saga

The group, Mr. Gakuru said, kicked out security guards hired by his office after taking them hostage at gunpoint.

On Saturday, Mr Dande denied that he planned or participated in an armed takeover of the Kilimani site, saying the alleged incident sounds far-fetched.

“The official receiver has alleged that in June, I and others hired armed individuals to forcibly take possession of the Kilimani estate. I am not aware of this incident and find it unlikely that armed persons were hired and the lives of public officials were threatened without charges being filed,” Dande said. Nation.Africa.

Just seven years before the alleged incident, Cytonn Investments had mesmerized investors, financiers, partners and the general public with its plans to employ cutting-edge architectural design in erecting a 35-storey triplex tower on the land, after receiving approval from the government. Nairobi County Government.

It seemed plausible as at the time Cytonn Integrated Project LLP was also building 477 houses on a 4.7 hectare plot of land in Ruaka called the Alma and business there was going relatively smoothly.

But in 2018, the provincial government withdrew its approvals and Cytonn opted to put the property up for sale.

To finance its real estate business, the company introduced Cytonn High Yields Solutions (CHYS) and Cytonn Real Estate Project Notes (CPN).

The two products pooled individuals’ money and promised to pay back the investments after some time with attractive interest. The money would be invested in real estate projects.

Of course, there was a big risk if the real estate project did not get off the ground.

The worst happened and hundreds of investors now risk losing more than Sh8.2 billion they pumped into CHYS and CPN.

To date, the official collector has received debt claims totaling Sh9.4 billion.

This includes two secured creditors claiming Sh1.176 billion, and over 1,000 unsecured creditors who are investors claiming Sh8.236 billion.

The Insolvency Act stipulates that secured creditors are paid first when companies go bankrupt.

CHYS and CPN were declared bankrupt on January 6, 2023 and the official liquidator was appointed as receiver to realize the assets of the two entities and recover investors’ money.

However, since CHYS and CPN had no assets of their own, Mr Gakuru was forced to seize and sell assets he acquired with money from the two Cytonn scions, even if they were registered in the names of different entities.

Thus, the Official Receiver laid claim to the Kilimani properties, armed with the blessing of Judge Alfred Mabeya, who in January 2023 allowed Mr Gakuru to trace such assets and use the sale proceeds to ease the pain of thousands of investors relieve.

In November 2023, Judge Mabeya issued a specific order placing the Kilimani property in the custody of the official receiver, despite opposition from Cytonn.

According to the official liquidator, Cytonn Investments founder Edwin Dande based his alleged orchestration of the takeover of the Kilimani property in June 2024 on the fact that there is an ongoing appeal, which suspended the implementation of the High Court’s liquidation order.

Currently, 29 lawsuits have stopped Cytonn from being liquidated. There are 19 in the Supreme Court and 10 in the Court of Appeal.

Mr Gakuru told creditors that officers at Kilimani police station in June refused to take a complaint from the official collector, who opted to return to court for interpretation of the Court of Appeal decision.

The courts agreed with Mr Gakuru that the status quo order only affected the sale of assets, but the official receiver retained the right to possession. This allowed Mr Gakuru’s office to take possession of the Kilimani land.

On Thursday, October 24, the Official Receiver revealed in an update to creditors that Mr Dande has refused to surrender five title deeds, a move that has now delayed another investigation that could yield even more bad news for already affected investors.

Mr Gakuru’s team told 583 attendees at the virtual meeting that many of the properties, like the Kilimani land, are undeveloped, and there is a suspicion that the Cytonn entities may have lost the true value of several parcels of land that were intended to be sold, have overestimated.

Other title deeds that Mr Dande has yet to surrender include projects called Taraji Heights (Ruaka), The Ridge (Ridgeways), Riverrun (Ruiru), Newtown (Athi River) and Applewood (Karen).

On its website, Cytonn Investments last posted a valuation of the properties in 2021. The 3.9 hectare Kilimani land was tagged at Sh1.4 billion. Athi River land (1,000 acres) amounted to Sh4.4 billion, Karen (10.4 acres) amounted to Sh894 million and Ruaka one (three acres) amounted to Sh1.5 billion.

Mr Dande told the Nation that he does not hold any title deeds, but claimed that the official liquidator has no right to claim title documents registered in the names of companies that are not undergoing liquidation proceedings or processes.

“Importantly, the five titles mentioned belong to solvent entities that do not fall under the jurisdiction of the official liquidator. The Court of Appeal issued stay orders on December 27, 2023 for the acquisition orders granted by Judge Mabeya on November 30, 2023. Consequently, the official collector has no authority to call for the title deeds or manage these properties in any capacity,” Mr Dande said. told Nation.Africa.

The Official Receiver now believes that the values ​​of the properties may be inflated as most of them are undeveloped.

Ruiru’s property is 100 hectares, but Cytonn’s share is 40.43 hectares. The Cytonn website valued the 100 hectares at Sh2.113 billion. This means that Cytonn’s share was worth Sh845 million according to the valuation on the website.

In January 2023, Judge Mabeya also remanded the Riverrun property to the official receiver’s custody.

While the execution of the liquidation was suspended, the High Court ruled that the office of the official receiver was legally occupied pending the decision of Cytonn’s appeal.

This meant that Mr Gakuru was allowed to take possession of the affected properties and their ownership documents.

The Official Receiver plans to conduct a valuation of the affected Cytonn properties to determine Cytonn’s valuations for the parcels and get an accurate picture of what creditors are likely to recover.

KCB and SBM Banks are the only creditors with collateral. This means that their debts are tied to specific assets that were used as collateral for loans.

KCB owes Cytonn $3.2 million (Sh425 million), arising from a loan it provided for the construction of the Cysuites Apartment Hotel.

Cysuites has 6 blocks with service apartments and is furnished as a hotel.

Cytonn collects an estimated Sh144 million from Cysuites annually.

The property is registered in the name of Wasini Resorts Ltd. Cytonn Investment Partners 20 LLP has bought 1 million shares in Wasini Resorts Ltd with money from CHYS and CPN.

Despite the payments, the ownership changes were not registered. However, KCB has acknowledged that Cytonn Investment Partners 20 LLP has made full payment for the shares in Wasini Resorts Ltd.

KCB served Cytonn with notice of the appointment of a trustee manager after the loan defaulted. Cytonn has filed a lawsuit to stop the appointment, and the case is pending in court.

SBM Bank is demanding Sh750.7 million from Cytonn Real Estate, which was secured with the title deed for a residential house called the Alma, in Ruaka.

The lender will meet people who have bought homes in the Alma as part of plans to monitor purchases in the Ruaka development.

“Walker Kontos represents SBM. That meeting is intended to audit Alma’s purchases to determine who paid for what and where, as the intention was that all purchases would be paid for at SBM Bank,” Judy Mugo, an assistant official receiver, told Thursday the creditors during the virtual meeting.

The development would have 477 apartments for sale. During the creditors’ meeting, the trustee announced that 306 homes have been completed and that some of them have already been sold or rented.

Buyers with title documents or proof of payment for their units will not be affected by Cytonn’s woes.

Those who do not have documents to prove their purchase or proof of payment will be listed among the unsecured creditors eligible for the liquidation of CHYS and CPN.

The official receiver also plans to sell a 12.5 percent stake that another Cytonn entity holds in Superior Homes, the developer of the Greenpark estate in Athi River.

Cytonn Investment Partners Fifteen LLP bought 25 million shares in the company for Sh250 million from the CHYS.

Mr Gakuru told investors on Thursday that Mr Dande had initially agreed to sell the shares after valuation.

Ian Anderson, the majority shareholder of Superior Homes, paid Sh25 million to law firm Bowmans for the valuation, which would be carried out by one of the big four accounting firms: Ernst & Young, Deloitte, PwC or KPMG.

Mr Gakuru told creditors that Mr Dande then changed his tune and alleged there was collusion between the official receiver and Superior Homes to undervalue the shares.

“The first time we had a meeting, Dande said the shares were worth Sh275 million. Ian Anderson and Shiv Arora paid Sh25 million for the valuation. Ian Anderson, the largest shareholder, agreed that he would buy the shares after valuation. The people who carry out the valuation are the four major accounting firms. The reason we have not reached a resolution yet is because of Dande’s misconduct,” Mr Gakuru said.

Mr Dande has filed a lawsuit to stop the sale of shares.

At the creditors’ meeting, lawyer Anthony Leshan claimed to be a member of a Creditors Restructuring Committee (CRC) opposed to the liquidation.

There was confusion about whether there were thousands of people behind the CRC.

But Mr Gakuru was of the view that such a committee does not legally exist because the Insolvency Act only provides for a Creditors Committee. Two creditors’ committees have been formed, one each for CHYS and CPN.

He added that records show Mr Leshan filled out power of attorney forms for only two people.

Mr Leshan responded by stating that the two people he represents are he and his mother.

He accused the trustee of refusing to meet, but Mr Gakuru was of the view that a meeting could only be called as a creditor, and not as a member of the CRC.