‘CET’ developer hits city with suit for billions
Posted on 22 October 2012, Author: Bénédcite Williams
Developer Porto Investment Hungary says it is suing Budapest city for HUF 12.5 billion (EUR 45.13 million) over the failure to settle the dispute over the CET commercial and cultural centre more usually known as the Whale.
Porto Investment, former general contractor of the project, said it is seeking the entire amount of the contract plus interest, and accused deputy mayor Gábor Bagdy, in charge of the project, of having done nothing to resolve the dispute between the developer and Budapest city.
The company provided 100 per cent of the investment ahead of the start of the works in 2009, after it won a tender for the redevelopment of the District IX Közraktár complex through the incorporation of two Danube-side, 19th-century warehouses, covering 12,000 square metres, into a 27,000-square-metre, steel-and-glass structure designed to host shops, art galleries, restaurants and conference halls.
The project, worth HUF 8.5 billion at the time (now EUR 30.68 million), was a public-private partnership with Porto Investment retaining operating rights for 30 years and the revenue shared between the developer (for events) and the city (for rental space).
The original delivery date of August 2010, then August 2011, is now an unknown quantity owing to the continuing tug-of-war between the various parties to the project. Bagdy blamed the original missed deadline on Porto Investment for having failed to link the complex to public utilities on time and for not communicating with the city over other unresolved issues. The developer countered that the delay in the opening was due to the city not delivering a variety of construction permits on time, resulting in a holdup in their installation.
The dispute was compounded by conflict over delays in the payment of companies contracted to perform technical work.
Events took a turn in August 2011 after Porto Investment turned to the National Investigation Office, filing a complaint against unknown perpetrators on suspicion of “fraud and official misconduct causing especially large damages”. It terminated its contract with the city, opening the way for the building to be transferred to the city. The transfer eventually did not take place after questions emerged regarding ownership.
Budapest’s Court of Appeals ruled this June that the CET must be transferred to the city, though both the amount to be paid to the investor in compensation and the eventual fate of the complex remain unresolved