Futura sues the Vatican Bank over Budapest Exchange Palace
Futura Investment Management Ltd and Futura Funds SICAV plc are taking legal action against the Vatican Bank, formally known as the Istituto per le Opere di Religione, after it defaulted on contractual commitments relating to a Hungarian property investment.
Futura has filed documents with the First Hall Civil Court of Malta seeking financial compensation for losses related to delays on the deal and reputational damages from IOR’s original legal claim.
The Futura-Kappa fund purchased the Budapest Exchange Palace in 2013 with the objective of refurbishing it, repositioning it in the market and selling it at a profit. This acquisition was made at the target price of €32m (for a 90% interest), which was significantly below the €40m valuation of the building at the time. This investment was clearly presented to IOR’s representatives at the time and represented an extremely attractive investment opportunity. The property is valued today at €56 million and, once redeveloped, will provide an attractive return for all investors.
In 2013, the IOR entered into contractual commitments to invest €41m. However, it only invested €17m and is, therefore, clearly in default on its obligations to meet its outstanding capital commitment of €24m as well as causing significant damages esti- mated in several millions of euro. The development of the building fell significantly behind schedule due to lack of resources, which was a direct result of IOR’s failure to honour its contractual obligations.
In June 2017 and despite having defaulted on its capital commitment, after months of negotiations, IOR rejected a bona fide offer to purchase its shares in the Futura-Kappa fund for an amount close to its original investment. This offer was rejected without the benefit of an explanation, a dialogue or a counteroffer.
The Directors of Futura Investment Management and Futura Funds SICAV plc, said: “We have been greatly disappointed by IOR’s breach of contract, which resulted in the postponement of refurbishing one of the most beautiful buildings in Europe and a jewel in the crown of the Hungarian capital.
“However, we are committed to successfully progressing with the refurbishment and sale of Budapest Exchange Palace. The project is on track to generate an attractive risk-reward profile for our investors.”
Futura strongly denies any allegation that IOR funds were used for anything other than the asset which IOR agreed to acquire.
Futura believes that IOR made what could have been a highly profitable investment had it not itself reneged on its obligations. On the contrary, it appears that Futura has been caught in the cross-fire between the current and previous management of IOR.
IOR’s default on the capital it committed coincided with a radical reshuffle of its top management and a shift towards liquid instruments in its portfolio.
The development of Budapest Exchange Palace recently recommenced as Futura Investment Management secured additional resources. They continue to be optimistic about the ultimate success of the existing project and the completion of this landmark building.