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CET project under fire, developer refutes claims

The Budapest municipality has raised concerns against the Central European Time or CET cultural and retail venture on the Danube shore in Budapest. An official stated that the entire project has to be reviewed, while the developer rejected the objections as being without any basis.

Budapest deputy mayor Gábor Bagdy announced that the investment is progressing in an arrangement that is rather obscure and is not necessarily beneficial for the city of Budapest.

The CET is currently under construction on a 27,000-square-meter plot near Szabadság híd. When completed, it is set to accommodate 2,500 sqm of hospitality, about 5,000 sqm of retail, 1,100 sqm of art galleries and 2,700 sqm of cultural and entertainment facilities. It is being built for an aggregate budget of HUF 8.5 billion.

Bagdy said that the investment is in a “difficult position”, given that the original opening date of August, 2010 had to be postponed twice, now scheduled for late spring of 2011. He said that an extensive review of the related contracts will be commenced to determine whether there are any signs of foul play or negligence that could warrant launching a civil or criminal investigation.

“I sit before you proud and confused,” said John M. Benfold, shareholder of the developer, Porto Investment Hungary Kft. Although he is proud of the building itself and what has already been achieved, the attacks against his firm and the investment are based on “rumor and misinterpretation” which leave him “shocked and dismayed,” he said.

Earlier, reports emerged that the developer is unable to continue financing the investment, leaving the city, which is the owner of the building, to pick up the tab. Benfold said Porto has already invested HUF 8.5 billion into CET adding that the entire project is fully financed and there are no public funds involved.

The only role the city plays is that it had to provide a guarantee towards MKB Bank, CET’s financing partner. This was a necessity, since the buildings being overhauled for the project are public property, they are owned by the city and cannot be mortgaged.

Imre Márton, owner and general manager of Porto Investment also rejected reports that the company would be getting a fixed fee from Budapest once CET opens. “We have agreed upon a flexible structure under which we receive a fee from the revenues coming from tenants, as such, we are the ones taking the risk,” he said.

He also noted that the rescheduling is in large part due to delays on the municipality’s behalf. “The project is 97% complete, what is missing is the authorization to install the public utilities, which the municipality has yet to issue.”

He was nonetheless optimistic about the continuation. “We are currently more than 60% let. By opening, we are aiming for 75-80% occupancy, which will hopefully climb to 90% in the ensuing months.”

At the same time he conceded that the current grand opening will likely have to be delayed further, since the facility will only realistically be completed in the late spring or early summer. “A summer opening makes little business sense. If we are unable to complete construction by the spring months, a September opening is more likely,” he said. (Gergő Rácz)