NAIROBI,Kenya May 29-Cytonn Integrated Project has suffered a major legal setback after the Court of Appeal cleared the way for the auction of its high-end Alma residential development in Ruaka, paving the path for SBM Bank Kenya to recover hundreds of millions of shillings tied to defaulted construction loans.
In a ruling delivered Friday, the appellate court dismissed Cytonn’s bid to stop the lender and the Official Receiver from selling the property, known as LR No. Kiambaa/Ruaka/6667, saying the developer had failed to meet the legal threshold required to obtain an injunction pending appeal.
The decision effectively removes the final legal barrier that had stalled the planned auction of The Alma project, a development that has become emblematic of the broader financial troubles surrounding entities linked to the collapsed Cytonn High Yield Solutions LLP investment structure.
The dispute traces back to 2019 when Cytonn Integrated Project LLP secured loan facilities amounting to Sh779 million from SBM Bank to finance the construction of The Alma project.
The borrowing was secured through legal charges and debentures over the Ruaka property.
However, the financial arrangement became entangled in the collapse and eventual liquidation of Cytonn High Yield Solutions LLP, which had mobilised investor funds and channelled them into multiple special purpose vehicles linked to real estate developments.
In the ruling, the three-judge bench comprising Justices Leonard Kimaru, Lydia Njuguna and Joseph Okello held that Cytonn was attempting to reopen issues that had already been conclusively determined in earlier litigation involving 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.”
“In the present case, the applicant does not dispute its indebtedness to the 1st respondent or that the suit property was offered as security for the loan facilities extended to it by the 1st respondent.”
The court further noted that any losses Cytonn may suffer from the sale of the property could adequately be compensated through damages, weakening the company’s argument that the intended appeal would be rendered nugatory if the auction proceeds.
The ruling comes after SBM Bank accused the developer of diverting more than Sh672.5 million in apartment sale proceeds to other banks instead of remitting the funds toward repayment obligations as stipulated in the financing agreements.
The Official Receiver had also opposed Cytonn’s application, arguing that further delays in asset recovery would prejudice more than 3,000 investors who have been waiting for resolution since the investment vehicle was placed under liquidation in 2023.
The appellate judges sided with the lender and the receiver, affirming that the statutory power of sale could proceed.
The decision now sharpens focus on Kenya’s distressed property sector, where developers that relied heavily on debt-funded expansion during the real estate boom are increasingly facing pressure from lenders amid slower sales, liquidity constraints and prolonged legal disputes.
