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Political allies rent valuable Budapest land at rock-bottom prices
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What started out as a cultural hub project in a popular part of Budapest two decades ago, ended up being controlled by business interests close to the political elite. They are renting the valuable land for bargain prices, only to operate bars and rake in the profits.
The Budapest municipality has for several years nurtured plans for a valuable area in the eleventh district of the city which was at one point heading for dilapidation. The idea was to turn it into a cultural center, a flashy avenue resembling a similar area in the central part of the city, frequented by tourists. Developing the plans for this ambitious concept ended up costing a fortune, but there was little in the way of results in the end, the hordes of tourists never came, several stores now stand empty and there is no culture apart from a few bars, but at least hospitality in the neighborhood is thriving.
The story is centered around Zsigmond Kert Kft, which became the operator of the facilities in the area. The way this firm came into that position is a perfect illustration of foul play in action. Once the city agreed on the cultural hub concept, the company submitted a bid to restore the area to host a broad range of events. Zsigmond Kert Kft was awarded a 20-year lease for the 2,500-square-meter area for a monthly net rental fee of HUF 350,000 (€1,100), an outrageously low sum.
One of the most conspicuous signs is the valuation process that was used to determine the rental. The Budapest municipality commissioned its own appraiser, who found various issues which resulted in a 95% discount to the property’s value compared to its market price. The appraiser also took an unusual approach to the appraisal. He benchmarked the property value against assets located on the outskirts of the city, which are consequently much less valuable. Although there is nothing legally wrong with the process, it’s very odd that the appraisal only cites negative assessments. The bidding company is known to have other profitable businesses already in operation, yet the city did not make any attempt to strike a more advantageous deal.
For a possible explanation, a look into the ownership of the winning bidder helps. Behind Zsigmond Kert Kft is Lajos Varga, who happens to double as a long-time event organizer for the governing Fidesz party. His CFTP company group covers a total of ten hospitality operators and has received several state contracts over the past years. Furthermore, Varga also seems to have a talent for ridding himself of the uncomfortable past.
CFTP is a new company, its legal predecessor was Medúza Event Kft, where Varga held a 50% stake. He sold his share package late 2013 to his partner, and the entire company ended up in the ownership of a certain Miklos Dima, who seems to have a special talent for coming into control of companies and then driving them into bankruptcy or liquidation. In essence, Varga spun-off his former business stake through involving a professional „burier” of companies to go on with CFTP that could thus have a completely untarnished reputation, at least on paper.
Besides Varga the other key owner in CFTP is Tibor Farago, who played crucial role in bringing to the table the cultural activities that supposedly led to Zsigmond Kert Kft winning the two-decade lease. Farago happens to be the owner of an art gallery. A former art gallery to be more precise, since the facility has since been closed down. Apparently it was only needed very briefly, to demonstrate his serious cultural professional background.
Currently, there is nothing along the lines of cultural events that would warrant the continuation of the contract, nor is there anything scheduled. The only thing to be said is that there is plenty of opportunities in the area to grab a drink, since the pubs and bars are doing quite well, and undoubtedly racking up sizeable profits on the valuable land that Zsigmond Kert Kft got its hands on for a token price.