Translation of József Spirk’s article “Budapest’s District 5 even organized a swap in order to sell a main street property” (“Még egy cserét is lezavart az V. kerület, hogy el tudja adni a főutcai ingatlant”) appearing in index.hu on February 16th, 2015.
The business circles of (Századvég Alapítvany director) Péter Heim and (András Giró-Szász brother-in-law) Péter Serfőző made a pure profit of HUF 70 million (USD 320,000) in under one and a half years. The corner property occupied by a trendy cafe in the Zrínyi street didn’t even belong to the district government under former district mayor Antal Rogán in 2010 and had to be obtained from the City. But even that wasn’t an obstacle. In record time the district did a swap with the city and invested it along with four other real estates into a company owned by the district, which a foreign company owned by Péter Heim immediately purchased. Shortly thereafter, the real estate was resold.
Péter Serfőző, the brother-in-law of András Giró-Szász, undersecretary for communications at the Office of the Prime Minister, was able to resell the District 5 property for nearly twice the price which he purchased a few months earlier as part of a package from the district under Antal Rogán by Péter Heim’s Luxembourg company.
On the basis of documents obtained by Index, it can be determined that the company behind the Luxembourg registered Praefinian SICAV-FIS may be small, but realized an excellent return on its investment in the 292 sqm shop at the corner of Zrínyi and October 6th streets.
Praefiniaum purchased the five property portfolio from the District 5 local government HUF 2.6 billion in July 2010.
The package also contained an apartment house appraised for HUF 1 billion (USD 4.5 million) and a building in the Dorottya street appraised for HUF 500 million (USD 2.5 million). The latter is currently being renovated as a 120 room hotel by a project company run by Serfőző in which both he and Giró-Szász have an ownership interest.
Motivated district government
The Zrínyi street property was the smallest property in the portfolio, but the local government still had to do everything in its power to be able to sell it in the summer of 2010, considering it was not the property of the local government at the start of 2010. In July, however, it managed to trade another property for it, invest it in a company as material apport, advertise a tender, and then sell it. It can be seen from the chronology how unusually well-oiled the machinery of the local authority.
The former public health center situated at the corner of 14 Zrínyi street was the property of the Budapest City Government. However, in 2010 District mayor Antal Rogán sent a letter to City vice-mayor Imre Ikvai-Szabó asking the City to swap the property for a 6th floor flat in the Kossuth square where the District had previously operated a nursery school. The nursery was similar in size, but in the interest of ensuring a smooth transaction Rogán offered to pay HUF 1 million as compensation for the difference in value.
The swap took place on the basis of a 2009 appraisal that valued the 292 sqm medical offices in the Zrínyi street at HUF 90 million. After the swap, the district general assembly —supported by the urgency of Rogán’s proposal—voted on February 11th, 2010 to invest the property into the Budapest District 5 Real Estate Development company (Belváros-Lipótváros Ingatlanfejlesztő Zrt. – BLIF). At the same time it voted to increase the company’s registered capital from HUF 100 million to HUF 2,780 million (USD 12.6 million).
The price of the 14 Zrínyi street property appearing on the list of properties to be invested in the company was only slightly smaller that the appraised value, even though it was explained at the time that foreign investors had disappeared from the market, and the renovation of Október 6 street as a pedestrian mall (within the framework of the Main Street project –ed.) would not influence the value of the real estate due to the crisis.
The mainstream project was completed at the beginning of 2010. Mayor Antal Rogán attended the ceremonial ribbon cutting ceremony on April 9th. At the time of BLIF’s founding, the district’s current notary, Zoltán Sélley, was the CEO of the share-holding company, and the local government even contributed HUF 1.2 million a month to cover the company salaries and operating expenses.
District promised to play closer attention next time
Following the successful preparations, in the summer of 2010 there was an acceleration of events. According to the ownership documents, the district officially took ownership of the property at 14 Zrínyi street on July 18th. Two weeks later the district’s formal proposal to sell BLIF was already ready for submission to the district city council.
Parallel to this they conducted a three round public tender in under one and a half months, which was completed on July 7th, one day before the city council could have supported the intention to sell the company.
Since the Luxemburg company was the only one to submit a valid offer, it was pronounced the winner even though its offer was HUF 80 million (USD 363,000) less than the value of the properties appearing on the list of material apport.
At the closed district city council of meeting of July 8th, the general assembly did not only vote to support the sale of BLIF, but also to conclude a sales contract with Praefinium SICAV-FIS. According to the official minutes, only one opposition assemblyman opposed the sale. Imre Palotás complained that the city council had to decide on the matter without ever having seen an offer, and that the transaction had taken place contrary to the original schedule in such a way that the district legal committee was not given the opportunity to state an opinion on the billion forint deal. Rogán assuaged Palotás by telling him next time they would pay closer attention to ensure that the assemblymen could familiarize themselves with the proposal.
The district city council approved the sale of the company for HUF 2.6 billion (USD 11.8 million) and the transfer of the company’s properties to the new owner. On July 28th the Zrínyi street property was registered in the name of the new owner.
In January it was revealed that (Századvég director) Péter Heim had represented the Luxemburg company to the district. For four years the district govenrment was not willing to disclose the name of the buyer. The secrecy resulted in the uncovering of a document in which Heim identified himself as the leading company officer to the local government and attested to the fact that Praefinium SICAV-FIS possessed sufficient cash to purchase the property, and that it could pay within 60 days of signing the contract.
Serfőző takes over the baton
After it was revealed that he had played a role in the purchase of the downtown real estate, Heim declared that by 2012 he was no longer involved in the matter. He alleged to Blikk that Praefinium SICAV-FIS did not know what to do with the buildings owing to the unwillingness of banks to lend, and that for this reason they decided to sell off the buildings. “I was not involved in the sale process. BLIF CEO Péter Serfőző organized that.”
Documents attest to the fact that Simsala Kft., a company in which Péter Serfőző had an interest, took possession of the Zrínyi street property at the beginning of 2011, and that in February 2012 it sold it for EUR 550,000 (HUF 160 million) plus VAT to a foreign investor. So in comparison to the 2010 purchase price, they were able to sell the property for HUF 70 million more to MB International Kft. Since then both Sisal Kft. and BLIF have gone into receivership.
It is worth noting in the case of the Zrínyi street property that here the district government’s earlier justifications offered in defence of the decision to sell district property do not apply. The prior public medical office was not the property of the District 5 government, and for this reason its maintenance did not constitute any kind of burden that would have warranted getting rid of it quickly and at a reduced price citing the crisis just at the time when the district’s large project, the main street project, was nearing completion. It is also strange that the district did not sell the property that it owned, but rather swapped it for another one, which it invested in real estate company offered for sale.
District government: “Fast” is an exaggeration
The downtown district government says the 2010 events differently. In response to our questions, it maintained that it is misleading to claim that they quickly wanted to invest the real estate into a company.
“The 14 Zrínyi street property was the property of the Budapest City government since 1993, but it never took possession of the property. The District 5 local government used it as a public medical office and lung care facility. The intention to swap properties had been held by both parties for a long time. Negotiations took place concerning the resolution of the property’s ownership, but the legal procedure was drawn out, and for this reason the swap agreement was only signed in February 2010. After this the property was incorporated into BLIF Zrt., the swap was handled by the City Government, and the investment of the property as material appear took place on the basis of an appraisal prepared by the City.
Incidentally, similar swaps are not unheard of. In the past the need to swap a number of properties on the part of the City government and the District 5 government came up not only in the case of property but also in the case of public areas. For example, it was through property swaps that we obtained ownership of the Vadász street retirement home in January 1997, as well as numerous public areas, including the József nádor square, the Kecskeméti square, Szabadság square, Vértanúk square, and Szervita square.
The Zrínyi street property was not sold separately, but as part of the above mentioned BLIF Zrt. portfolio. When appraising the value the City government took into consideration that fact known to us as well that the property previously functioned as a lung care facility, and for this reason contained a lot of dangerous material harmful to health, which obviously influenced the value and utility of the property, not to mention the high cost of removing the materials.
In the case of BLIF Zrt. we made an experiment in the interest of improving, and for this reason invested the real estate into the real estate development company as material apport. Since the local government did not get enough loans to renovate the real estate, at first we tried to involve investors. We wrote a public tender to sell 50 percent of the company, with the local government retaining half. After this tender was not successful, only one offer arrived. The empty real estates only generated losses, and for this reason we issued an international, open, multi-stage tender for the entire real estate package.”
In response to our questions the district government last answered that it issued the 50 percent public tender in July of 2009 when the Zrínyi street property was not even the property of the district.
January 11, 2010 – Antal Rogán formally asked Imre Ikvai-Szabóto swap the public medial offices at 14 Zrínyi street.
January 14, 2010 – The district general assembly votes to increase BLIF registered capital by the value of the real estate to be invested as material apport, and to support the 14 Zrínyi street property swap which already appeared on the list of properties to be invested as material apport.
January 28, 2010 – The district general assembly approves the swap of the Kossuth square 6th floor flat used as a nursery school. Approves new articles of incorporation for BLIF.
February 2010 – District 5 and the City sign swap agreements.
April 9, 2010 – The downtown main street is officially delivered. Facing the Október 6 street, the District 5 public medical offices is situated in the most desirable part of the street.
May 19, 2010 – The district government issues a public tender to sell 100 percent of its shares in BLIF.
June 18, 2010 – The land office registers the District’s ownership of 14 Zrínyi street.
June 29, 2010 – The District ownership and sales committee finds that the offer received from Luxemburg registered Praefinium during the first round is valid.
July 5, 2010 – The proposal to sell BLIF is prepared for submission to the District general assembly.
July 7, 2010 – The third round of the public tender is completed.
July 8, 2010 – In a closed session the district general assembly votes to sell BLIF to Praefinium (for 80 percent of the value of the properties invested into the company).
July 28, 2010. – The land office registers BLIF’s ownership of 14 Zrinyi street.
January 11, 2011 – The land office registers Simsala Kft.’s ownership.
February 9, 2012 – The land office registers MB International’s ownership.
From CEO to receiver
HVG recently reported that Péter Serfőző, András Giró-Szász’ brother-in-law, and business partners was appointed receiver for BLIF. The companies liquidation was begun at the end of 2014. The weekly magazine calls attention to the fact that Serfőző was the former director of the company that had registered capital of HUF 1.5 billion (USD 6.8 million), and that he became CEO of the company on September 20, 2010 after Praefinium after the company purchased five properties from the local government. In May 2012 Hausop Kft. took ownership of the property in place of Praefinium. Hausop is a company in which Péter Lovas has an interest, just like Blixton Kft. which jointly owns the Dorottya 8 Hotel Kft. with Serfőzővel és Giró-Szász — the same company which took the HUF 500 million Dorottya street property with it after splitting from BLIF.
After it completed its task in the downtown of Pest, Serfőző’s other company, Simsala Kft. also went into receivership after changing owners. The company’s new center can be found in the Felsőpakony and Kossuth streets.