Hungarian central bank buys premium property, paying well above market price to an offshore seller

The National Bank of Hungary recently spent 45 million euros on acquiring a prime office building in downtown Budapest. Not only was the purchase 15 million euros more than paid by the previous owner, it was also at least 5 million euros higher than the valuation of an official state agency.

National Bank of Hungary was revealed in the summer to be the surprise purchaser of The Eiffel Palace in Budapest. The Eiffel Palace is a prestigious renovation of a historic printing business and publishing house, launched on the market earlier this year as premium office space in the centre of the city.

The fact that the MNB would make such a purchase was unexpected, as it is anything but common for the Hungarian central bank to spend money this way. What made the deal even more curious was the price.

Atlarszo.hu obtained records showing that the project company, Eiffel Palace Kft, bought and refurbished the property for 31 million euros. In turn, the MNB paid 45.3 million. The 15 million markup was justified by a valuation conducted by KPMG, the international consultancy firm. However, the methodology employed was questionable and raises several concerns about the process.

To add even further question marks about the valuation, the Hungarian Trade and Investment agency compiled a brochure earlier this year, showcasing valuable properties that foreign investors may be interested in buying. The document put Eiffel Palace’s value at 40 million euros.

Digging deeper, Ataltszo.hu took a look at corporate records and found several interesting elements in the ownership structure of Eiffel Palace Kft, which can ultimately be traced back to offshore companies in Cyprus and the Dutch Antilles.

Attila Kovács, the head of Eiffel Palace Kft reached out to Atlatszo.hu when our findings were published and requested several corrections. He stated that the final price of the project included additional costs, such as loans taken out by the project company, thereby justifying the sum.  Kovács asserted that the final price was a great deal for the MNB for such top quality real estate. He rejected the claim that there was anything problematic with KPMG’s performance and stated that there is nothing obscure in his firm’s ownership structure, which is controlled by one domestic and one foreign partner.

While Kovács has made his rebuttal public, he has not provided any evidence that would invalidate our earlier findings. Atlatszo.hu maintains that everything in its coverage of this story is accurate and supported by the records.

The central bank has been making the headlines recently, since the MNB made several curious purchases and investments, including launching courses in economics to promote the “unorthodox” approaches which have characterised the present government’s economic policies. In addition, there was the 5.5 million euro spent on a building that is said to host the courses. The argument from central bankers is that the MNB realized significant gains from a weak forint weighed against the country’s foreign currency reserves, and therefore the money is not coming from the taxpayer. This profligate approach to money is all the more interesting as the central bank – led by the Fidesz government’s former economy minister, György Matolcsy – promised a financially stringent operation.  He also filed charges because the previous management commissioned a multi-million design overhaul at the MNB.