Tag Archives: Schossberger Mansion

Hungary as the Orbán family’s private estate

It was almost a year ago that I wrote a post about the then newly launched real estate business of Prime Minister Viktor Orbán’s son-in-law, István Tiborcz.  The young man, when he was barely out of law school, set out to become an entrepreneur. He became part owner of what would soon become a thriving, highly profitable business specializing in LED street lighting technology. His family connection to the prime minister practically ensured his success. One city after the other signed contracts with his firm to modernize its street lighting with funds that came from the European Union. All went well until OLAF, the EU’s anti-fraud office, started to investigate. Tiborcz quickly sold his share in the business and moved on to safer pastures. He and his foreign business partners, like the Saudi Gaith Pharaon and the Turkish Suat Gökhan Karakus, began buying up run-down but valuable pieces of real estate. They especially liked stately mansions.

One of their first purchases was the Schossberger Mansion in Tura, about 50 km from Budapest. Although Tiborcz tried to hide his presence in the company, within a few days 444.hu learned that he was one of the new owners of the mansion. Angelina Jolie so admired the mansion that she used it as one of the sets for her movie “In the Land of Blood and Honey.” Although the purchase price was low (280 million forints), fixing up the place will be a very expensive undertaking. Ten years ago the estimated price was 6 billion forints or $203 million. After seeing a 10-minute video tour of the interior, I’m convinced that the cost of renovating and modernizing the place will be much higher than this old estimate.

Of course, we have no idea of the size of Tiborcz’s stake in this business venture, but it is most likely substantial because sometime in the spring of 2016 Győző Orbán, father of the prime minister, showed up and spent a whole day looking around. As a young man from Tura told the reporter from Bors, “it took a long time because he was shown everything inside.” As far as the locals know, the new owners want to use the former mansion as a luxury hotel.

Work began in March 2016, first on the ten hectare park that surrounds the mansion. By September the workers began refurbishing the interior as well. The mansion, which used to be open to the public as a tourist attraction, had to be closed. Some of the locals were sorry that the castle will be transformed into a luxury hotel, but others were convinced that the Orbán connection will do miracles for the sleepy little town of 8,000 inhabitants.Until now Tura was forgotten by the Orbán government. As a local man told HVG’s reporter: “We will have something here only if Viktor Orbán wants it.”

It looks as if Viktor Orbán, now that his son-in-law is part owner of the Schossberger Mansion, wants it. Tura has hit the jackpot. According to estimates, in the next year or two perhaps as much as 20 billion forints’ worth of investment will arrive in Tura.

In May several online news sites reported that a 2.7 MG geothermal power plant will soon be built. It will produce electricity for 800 houses and will also eventually heat greenhouses on 11 hectares. The water temperature of the geothermal well is 129°C. After this incredibly hot water is used to generate electricity, it cools down to 70°C and will then be used to heat the greenhouses. The water, once it has finished its heating cycle, will be returned underground, an EU requirement. The power plant will cost 5.5 billion forints, half of which will come from the European Union and the rest from a consortium of domestic investors.

Tura until now couldn’t offer much to visitors, but its fortune will soon change thanks to the Orbán family.

By late June work began on the power plant. It is being built by KS Orka Renewables Pte Ltd. of Singapore using technology from Iceland, where 90% of the buildings are heated geothermally. The first greenhouses, which will most likely be ready within a year, will occupy 5.5 hectares at a cost of 2.3 billion forints. Again, half of this sum will come from Brussels. Later, other greenhouses will be built, occupying another 5.5 hectares. Altogether the greenhouse project will cost 4.5 billion forints. The greenhouses are expected to produce 6,300 tons of tomatoes, most of which will be for export. The hope is that the greenhouse businesses will be able to amortize the initial investment over six or seven years. The investors project an eventual annual profit of about seven billion forints. In addition, the greenhouses are expected to employ 170 people. It sounds like a terrific project, assuming the projections are halfway realistic.

But surely, it cannot be a coincidence that Tura suddenly became the recipient of all this largess. The investments were declared to be “priority projects,” meaning urgent and important for the national economy. I should add that most of the money comes from three banks: Eximbank, MKB, and Gránit Bank. The first bank is state owned; MKB is apparently owned by someone close to Fidesz and Orbán; and 49% of Gránit Bank belongs to the Hungarian state. Thus, projects that will make the Schossberger Mansion business venture of Orbán’s son-in-law more viable are being financed mostly by the Hungarian state. It is easy to become a millionaire this way.

January 3, 2017

Another EU project: Renovation of fortified castles and luxury mansions

It was about a year ago that I first encountered two new programs launched by the Orbán government: the “National Castle Program” and the “National Mansion Program.”

The castles we are talking about here are actually late medieval fortified structures, built for the defense of the country. They were especially numerous along the border between Royal Hungary and the Turkish occupied center of the country. The structures in Szigetvár and Eger are perhaps the most famous. It was in Szigetvár that Suleiman the Magnificent died in 1566, as did the captain of the fort, Miklós Zrínyi/Nikola Zrinski, the Croat-Hungarian military leader who led his troops to their death instead of capitulating. Eger, the scene of a Turkish-Hungarian encounter in 1552, was memorialized in the popular novel by Géza Gárdonyi, Eclipse of the Crescent Moon. Both are tourist attractions, so it made sense to put them at the top of the reconstruction list.

The government will salvage 35 fortified castles and renovate 34 mansions. All told, 93 billion forints will be spent on these two projects, “mostly from money coming from the European Union.”

The justification for these two projects is that they will boost tourism. The government estimates that the renovated mansions will attract an extra 800,000 visitors, and an additional 600,000 visitors are expected at the fortified castles. Fifteen billion forints will have to be spent on hotels and services near the structures which, the government hopes, will come from private entrepreneurs. Viktor Orbán assigned János Lázár to supervise these projects. He, in turn, entrusted Undersecretary László L. Simon with the task, but Simon was fired a couple of weeks ago for incompetence.

Most of the fortresses are in terrible shape. Once Hungary reclaimed the Turkish-occupied part of the country at the end of the seventeenth century, the structures no longer had any purpose. They could conceivably have been turned into estates since each of these fortified castles had a so-called “residence tower” (lakótorony), which at one point was occupied by the lord of the castle himself. But these uncomfortable old buildings were eventually abandoned in favor of mansions in the countryside or residences in the capital. And after the soldiers left, the locals pilfered the stones and bricks of the castle to build houses nearby. (This is how most city walls have disappeared over the centuries.)

To what extent should these structures be reconstructed? This question has been the subject of furious debate for a long time between those who consider extensive reconstruction a falsification of history and those who argue for complete reconstruction. The government’s emphasis is on tourism, not the sanctity of architectural history. And visitors are not going to flock to see piles of stones. Therefore, most of these fortresses will be more or less rebuilt. This is certainly true of the fortified castle of Diósgyőr.

Readers who want more information about this government initiative should take a look at an article titled “National Castle Program: Removal of ruins or falsification of history.” Here we learn that at least two of these fortresses will be completely reconstructed and that six will be partially reconstructed. In 17 cases only a section of the former structure will be reconstructed. Nine, most likely buildings too far gone, will receive some treatment to stop further deterioration.

And before

The Diósgyőr Castle after the rebuilding and before Diósgyőr Castle before and after

The reconstruction of the fortified castles may make some sense commercially, but the renovation of the mansions is questionable for several reasons. At the moment these fairly decrepit structures, most of them built in the nineteenth century, are not architectural masterpieces. Most eventually were used as schools or were even cut up into apartments or offices. Something ought to be done with them, but should they be completely renovated on mostly EU money? What does the state intend to do with 34 mansions? I fear that the plan is to sell them at a favorable price to domestic and foreign friends of the Orbán government. We mustn’t forget that István Tiborcz, Orbán’s son-in-law, is now in the real estate business and is involved in the sale of the Schossberger Mansion to a billionaire Turkish businessman.

There is another suspicious aspect of the National Mansion Project. In the last few months the number of officially recognized historic buildings has ballooned. The reason for adding more mansions to the list is simple. A construction company who wins a bid to renovate a historic building can charge up to 400,000 forints per m² both for alteration and construction, while for a non-historic building a company can charge only 320,000 for construction and 220,000 for alteration. In brief, more money can be squeezed out of Brussels if the mansion is of some historic significance or is deemed an architectural masterpiece.

The latest outrage is the government’s change in the payment schedule for construction work on these projects. The original understanding was that for projects designed to stimulate the tourist industry 30% of the amount bid could be received in advance. In April the government changed the regulation. Companies involved in these projects could get 50% of their money up front. On Monday the government decided that, without replacing a single brick, the construction companies could be paid in full. As far as Magyar Nemzet knows, “the European Commission is taking a dim view of this practice,” although at the moment the cost is being borne by the Hungarian taxpayers since Brussels will pay only when all work is finished, which in some cases may be only in 2022.

The Nádasdy Mansion is also the part of the program

The Nádasdy Mansion is also the part of the program

The mansion project may seem lavish, but in fact it is seriously underfunded. It costs an average of 400,000 forints per m² to build an ordinary house in a fashionable section of Budapest. To renovate these residences is extraordinarily expensive. According to the former chief of the office that used to handle issues connected with the country’s cultural heritage, the only sensible move would be to sell these state-owned mansions, as is, to domestic and foreign buyers who would undertake their renovation under strict guidelines. The money allocated for these houses, 1.5 billion per structure, might be enough to guarantee that the roofs don’t leak or perhaps it will cover the cost of an assessment of the physical state of the structures. But if that is the case, what will happen to the money the Hungarian government is giving from its own resources to the construction companies for the renovation of these buildings? A good question.

July 20, 2016

Turkish and Saudi business ties of Viktor Orbán’s son-in-law

I’m coming to the conclusion that the “first family” of Hungary must have gotten together on several occasions to figure out how to guarantee that their new son-in-law, István Tiborcz, becomes a very rich man. Thanks to the good offices of Viktor Orbán, the young man—he is still not quite thirty years old—made a small fortune in the LED street lighting business. In fact, he was too successful. OLAF, the European Union’s Anti-Fraud Office, wanted to know more about this super company that received almost all of the contracts for EU-financed modernization of city lighting in Hungary.

With a possible investigation on the horizon, Tiborcz had to distance himself from the lighting business. And the head of the family had to find another source of income for Tiborcz that would be less directly involved with public procurements. It looks as if Orbán’s advice was for his son-in-law to try his hand at real estate.

Tiborcz’s first real estate venture was the purchase of the Schossberger Mansion last October. His father-in-law most likely also counselled him to make sure that his name doesn’t appear on the letterhead of companies he owns in full or in part. So, the new real estate company, called BDPST Ingatlanforgalmazó, is on paper owned by two people, apparently friends of Tiborcz. But since he paid the excise tax in connection with the purchase of the mansion, we can be confident that Tiborcz is behind BDPST. I wrote about this deal about half a year ago.

At that time we also learned that Tiborcz may have interests in two other real estate firms, AMX HS and AMX Nador House. The CEO of both companies was a wealthy Turkish businessman, Suat Gökhan Karakus, who lives in Hungary.

In the foreground Adnan Polat / Source: Magyar Narancs

Adnan Polat  / Source: Magyar Narancs

A few months later atlatszo.hu discovered that Tiborcz has other important foreign backers. One of them is the incredibly rich Adnan Polat, a Turkish businessman who is one of the owners of AMX HS and AMX Nador House. He has, as 444.hu learned, many contacts within the Orbán government and is very active in Hungarian-Turkish cultural and business associations. He is involved with the Hungarian Trading House in Istanbul, and the Hungarian Cultural Center set up shop in the offices of Polat Holding.

Another man who is now in Tiborcz’s circle of business associates is Ghaith Pharaon, a Saudi businessman of dubious reputation. AMX Nador House, a joint venture of Polat and Tiborcz, managed to buy from the state the old headquarters of Postabank at József Nádor tér. Soon enough they sold AMX Nador House to a certain Ammar M. A. Abu Namous, who immediately changed the name of the company to Pharaon-Kappa Befektetési és Tanácsadó Kft. The Hungarian internet site Válasz soon found out that Namous is a lawyer who handles Ghaith Pharaon’s business ventures in Hungary. There are already seven such businesses, all of whose names include letters of the Greek alphabet. In addition to extremely valuable Budapest properties, Pharaon through Namous bought the Zichy-Hadik Mansion in Seregélyes and the Hochburg-Lamberg Mansion in Bodajk.

The available English-language information on Ghaith Pharaon is extensive, mostly because of his association with the Bank of Credit and Commerce International (BCCI) back in the 1990s. Secretly acting on behalf of BCCI, Pharaon acquired control of two American banks in violation of federal banking laws. When the fraud was discovered, BCCI was forced to sell the banks, which soon after were shut down by regulators when it was determined that they were insolvent. Pharaon was charged with wire fraud and racketeering conspiracy. He has been wanted by the FBI since 1991 for his role in the fraud involving the financial collapse of BCCI and remains a fugitive. In addition, Pharaon was accused in a 2002 French parliamentary report of having financial dealings with hawala, an Islamic financial network which is also used by terrorist organizations. Currently, he is chairman of Attock Petroleum, CEO of National Refinery, and Director of Pakistan Oilfields, just to mention a few of his business ties. He lives mostly on his super yacht named Le Pharaon.

Pharaon might be wanted by the FBI, but the Orbán government is not fussy. Rumor has it that the state is planning to sell the building next door to the former Postabank building that is already in Pharaon’s possession. The building, which is currently occupied by the ministry of national economy, will soon be available when the ministry moves, along with the prime minister’s office, to the Castle District in Buda. In addition to his various real estate deals, Pharaon is also a business partner of the Hungarian state through the Hungarian National Trading House.

The stories circulating about Pharaon eventually worried opposition politicians. At the end of April the parliamentary committee on national security spent a three-hour session on the relationship between Pharaon and the Orbán government, at the end of which deputy chairman Szilárd Németh (Fidesz) informed reporters that “this Pharaon is not that Pharaon.” Then, on June 6, when János Lázár was testifying before the committee about the work of the secret services in the year 2015, Bernadett Szél (LMP) decided to ask him about the “Pharaon case.” Did the government manage to learn more about Pharaon? Since she didn’t receive a satisfactory answer, Szél is demanding a separate hearing of the case in the near future.

Whether Pharaon is a national security risk or not I have no idea, but Tiborcz’s role as an intermediary between the Hungarian government and foreign businessmen, given Tiborcz’s relation to the prime minister, is troublesome to say the least. It seems that Tiborcz and his father-in-law are unwilling to settle for a role for Ráhel Orbán’s husband that has nothing to do with the Orbán government and the Hungarian state. After all, as long as Orbán is prime minister, the financial benefits of such a relationship are enormous.

June 8, 2016