Real estate and investments firm Cytonn is locked in a contentious dispute with Superior Homes Kenya over the valuation of its minority stake.
Edwin Dande, CEO of Cytonn Investments, revealed in a recent press statement that the company is fighting to prevent the sale of its 12.5% stake in Superior Homes Kenya at what it considers a significant undervaluation. The stake, which Cytonn values at approximately KES 1 billion based on a 2021 valuation, is reportedly being discussed for disposal at around KES 250 million.
“We realized that our 12.5% stake worth around KES 1 billion was being discussed to be disposed at around KES 250 million,” Dande said. He emphasized that Cytonn has taken legal action to halt the transaction, seeking to preserve the assets while the dispute is resolved.
The conflict stems from Cytonn’s dual role as both an investment manager and real estate developer. The company raises funds from regulated public markets and unregulated private markets, deploying them into various investment vehicles, primarily focusing on real estate projects.
One such investment, made through Cytonn Investment Partners 15 (CIP 15), acquired the stake in Superior Homes Kenya about eight years ago. Dande noted that Cytonn has been instrumental in developing Superior Homes, providing capital, management expertise, and board representation.
However, the relationship has soured amid Cytonn’s efforts to restructure its high-yield solutions product, which encountered difficulties and is now under the management of an official receiver. The potential sale of the Superior Homes stake is part of this restructuring process, aimed at repaying investors in the troubled fund.
Dande expressed concern over recent developments at Superior Homes, including a dramatic increase in debt. “We recently realized that the amount of debt had risen from around KES 125 million in January 1st, 2024 to around KES 1.1 billion by the end of June 2024,” he stated. This tenfold increase in debt over six months has raised questions about the company’s financial management and the impact on Cytonn’s stake value.
Further complicating matters, Dande alleged that some of Superior Homes’ assets were pledged to Gulf Bank without proper authorization, potentially violating a court-issued preservation order. Cytonn also insists om accessing and reviewing bank accounts.
Superior Homes Kenya (SHK), for its part, has sought to distance itself from Cytonn’s troubles. In a statement issued on August 26, 2024, SHK CEO Shiv Arora, who is the former Head of Private Equity, Investments and Real Estate at Cytonn, emphasized the company’s independence and majority ownership by the Ian H. Henderson family from the United Kingdom.
“CIP 15 LLP is a minority shareholder in SHK with a board seat because of their minority shareholding of 12.5%. The Henderson Family own the majority shareholding in the business of 87.5%,” Arora stated. He further clarified that Cytonn’s stake does not entitle it to Superior Homes’ assets or the right to interfere in normal business operations.
Superior Homes maintains that its business continues to grow, with ongoing developments in multiple counties across Kenya. The company has positioned itself as a pioneer in master-planned gated communities, with flagship projects like Greenpark Estate.
The dispute has spilled into the public domain, with both parties issuing statements to clarify their positions. Cytonn has called for transparency in any potential sale of Superior Homes’ assets, insisting that buyers should be aware of the ongoing litigation.
“It would be misleading for people to continue to buy this real estate without clear knowledge that there’s actually dispute around the real estate,” Dande warned.
Dande remains optimistic about resolving the issue, stating, “With time, I’m certain that we’ll resolve the issue.”
