Cytonn bleeds as key investors pull out funds

Cytonn Investments CEO Edwin Dande during a media breakfast meeting in Nairobi, on Wednesday, September 30 2020, where he cleared the air on allegations by a section of media alleging bagging of investors' billions by the company with a promise of mega returns. [David Njaaga, Standard]

A number of investors have withdrawn cash from Cytonn Investments.

This comes as the real estate firm battles a backlash following revelations that it was unable to pay back matured claims on some of the more than ten funds it pools public money from.

Addressing a press conference yesterday, Cytonn Investments Chief Executive Edwin Dande confirmed that they received withdrawal requests by some of the clients.

But he insisted that the firm had “ample” liquidity for any investor who wanted their money back.  

“Of course we’ve seen an increase in withdrawals as this negative publicity continues,” Mr Dande said citing tight finances faced by the firm.

He declined to disclose the amount that had been withdrawn adding that it was “nothing to worry about.”

“I know the amount but its confidential nothing to worry about you’ll not hear any money market fund investor saying I can’t get my money,” said Dande.

Cytonn has come in the spotlight owing to a nasty legal battle with the Capital Markets Authority over one of its regulated funds, the Cytonn High Yield Fund (CHYF).

Dande said that Covid-19 had impacted some of their projects and they have had to restructure terms leading to the extension of maturity dates for investors.

He said that they embarked on mitigation measures such as phasing some of their projects and giving people paying for housing units flexible payment terms that are long term.

“Every real estate developer is dealing with those issues as long as you have good mitigation measures you will be fine but you have to explain yourself to investors and the public, in the same way, were doing,” said Dande.

He assured that Cytonn has invested in real estate projects in Karen and Kiambu where returns are good despite a slump in the property market.

Cytonn defended their business model which pool funds from the public and deploy the monies raised for investments mainly into real estate projects.

He said that a typical transaction happens where a person takes, for example, Sh100,000 to a bank and gets almost no returns and then Cytonn as a real estate borrows from the bank and has to pay high interests of between 14 - 18 per cent.

He said instead of this investors directly fund them and get the high returns.

“Our model structures out the banks, we’ve created investment vehicles whereby instead of you taking Sh100,000 to the bank and get nothing I just come directly to you and say give me and I’ll pay you14 to 18 per cent interest annually,” he said.

He added that it was difficult to attain an affordable housing agenda without raising money from the capital markets.