NAIROBI, Kenya — The Court of Appeal has cleared the way for the auction of Cytonn Integrated Project LLP’s high-end Alma residential development in Ruaka, dealing a major setback to the developer as lender SBM Bank Kenya moves to recover funds tied to defaulted construction loans.
In a ruling delivered on Friday, a three-judge bench dismissed Cytonn’s application seeking to stop SBM Bank and the Official Receiver from selling the property, known as LR No. Kiambaa/Ruaka/6667, pending the hearing of an appeal.
The judges found that Cytonn had failed to meet the legal requirements necessary to secure an injunction and halt the lender’s statutory power of sale.
The ruling effectively removes one of the final legal obstacles standing in the way of the planned auction of The Alma project, a development that has become closely associated with the financial challenges facing entities linked to the collapsed Cytonn High Yield Solutions LLP investment structure.
Court records show that Cytonn Integrated Project LLP obtained loan facilities amounting to Sh779 million from SBM Bank in 2019 to finance construction of the residential development. The borrowing was secured through legal charges and debentures registered against the Ruaka property.
However, the financing arrangement later became intertwined with the collapse and liquidation of Cytonn High Yield Solutions LLP, which had mobilised investor funds and channelled them into various real estate projects through special purpose vehicles.
In their decision, Justices Leonard Kimaru, Lydia Njuguna and Joseph Okello said the developer was attempting to revisit issues that had already been determined in previous litigation relating to the liquidation process and preservation orders affecting Cytonn-linked entities.
“Even though a low threshold is set for arguability, it is clear to this Court that the applicant is seeking to reopen issues that this Court has previously dealt with,” the judges stated.
The court further observed that Cytonn had not disputed the existence of the debt or the fact that the property had been offered as security for the loan facilities advanced by SBM Bank.
The judges also held that any losses arising from the sale of the property could be compensated through damages, undermining the developer’s argument that the appeal would be rendered meaningless if the auction proceeded.
SBM Bank had previously accused the developer of diverting more than Sh672.5 million in apartment sale proceeds to other financial institutions instead of applying the funds toward repayment obligations as required under the financing agreements.
The Official Receiver opposed further delays, arguing that postponing asset recovery efforts would prejudice more than 3,000 investors awaiting resolution since Cytonn High Yield Solutions LLP was placed under liquidation in 2023.
