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Creating homes in a
smart way

...directly tapping the market’s pulse

2007

Loan agreement


Arco Invest EOOD, a subsidiary of Arco Investeeringute AS, concluded a loan
agreement with Piraeus Bank Bulgaria Plc. in amount of 219 mEEK (14 mEUR)

The purpose of the loan is the financing of construction of Manastirski project
in Bulgaria in Sofia. Maturity of the loan is 48 months with a grace period 24
months. Interest is based on 3m EURIBOR and the margin 2,25% to 2,75% depends
on the sales of the apartments.

The project is located 2km from the city centre and involves 8990m2 of land.
According to the zoning rights the above and underground construction volume in
total is 34 700 m2.

In three years the company plans to construct there commercial and residential
spaces.

 
Additional information:
Heigo Metsoja
IRO
+372 6144 654
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http://www.arcorealestate.com

Arco Real Estate launched a market overview of 6 countries


Arco Real Estate together with auditing and consulting company Deloitte joined forces to prepare, for the first time, a real estate market analysis covering six countries, which reflects the market movements in 2007 and provides a vision of the trends for the current year. The analysis provides a market overview of all the domestic markets of Arco Vara, in Estonia, Latvia, Lithuania, Ukraine, Bulgaria and Romania, across various real estate segments. The analysis is in English and available on the corporate website of Arco Real Estate at www.arcorealestate.com (section: market)
 
Due to the cooling off of global real estate and stock markets, the year 2007 was very dynamic on all the domestic markets of Arco Real Estate. The slow-down of economic growth in the Baltic States, increasing inflation, stricter loan policies introduced by banks and the accompanying waiting game of local consumers concerning the real estate market, brought about several changes, especially in the second half of the year. The residential premises market in the Baltic States is characterised by longer sales periods, price adjustments and an increasing supply. Development has slowed down; however, the general volume of transactions and price reductions in the region as a whole have been modest. The first quarter of 2008 has shown some recovery in transaction volumes and price levels have stabilised.
 
The Bulgarian and Romanian markets, on the contrary, were characterised by intensive development and construction activities in 2007. Compared to the previous year, real estate prices in Bulgaria increased by 29%, according to official statistics. The demand for modern office premises is high and the shopping centre market is on the upswing, while the volume of retail premises per resident in Bulgaria remains the lowest in the region. The Romanian real estate market is also characterised by very active development of residential premises: large projects are in progress and development activities are also heading to the periphery of cities. Office and retail premises are in high demand and the return indicators are attractive to investors, which has also resulted in the intensive development of the sector. The Ukrainian residential premises market has been less active compared to previous years; however, the market sector for office and retail premises is rapidly expanding and new strong participants are making their way onto the market.
 
According to Tõnu Luts, the Head of the Appraisal Group of Arco Vara, it is the first market overview project covering all six countries and it provides a comprehensive picture of the developments in the markets. “We are very glad that in cooperation with a strong partner, we are able to introduce something new to the market. An overview of the macroeconomic environment and area of taxation prepared in a uniform framework by Deloitte and the analysis of the markets prepared by Arco Vara analysts is undoubtedly an essential reference material for our various clients and partners,” says Luts.
 
Senior Manager of Tax and Legal Department of Deloitte Advisory Mait Riikjärv also gives credit to excellent cooperation: “Cooperation between strong partners carries considerable weight in the European Economic Area and in our business. We complement each other in a positive way, and through this synergy definitely provide added value to our clients. The experience, know-how and the thorough grasp of Arco Vara makes it all possible. I hope that we will have more cooperation projects like this one in the future”.

Arco Real Estate is a leading real estate developer in the Baltic's, undergoing a CEE expansion with  presence established in Ukraine, Bulgaria and Romania. The operations involve real estate  development, brokerage, construction and investment management arm. The company is located in 30 cities and has in total 649 employees. According to 9 months results 2007 consolidated revenues were 687 mln kroons (44 mln euros), net profit 264 mln kroons (17 mln euros) and assets 3 536 mln kroons (226 mln euros). Arco Vara is listed on Tallinn Stock Exchange.

"Deloitte" is the brand under which tens of thousands of dedicated professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management and tax services to selected clients. These firms are members of Deloitte Touche Tohmatsu, a Swiss Verein ("DTT"). Each member firm provides services in a particular geographic area and is subject to the laws and professional regulations of the particular country or countries in which it operates. DTT helps coordinate the activities of the member firms but does not itself provide services to clients. DTT and the member firms are separate and distinct legal entities, which cannot obligate the other entities. DTT and each DTT member firm are only liable for their own acts or omissions, and not those of each other. Each DTT member firm is structured differently in accordance with national laws, regulations, customary practice and other factors, and may secure the provision of professional services in their territories through subsidiaries, affiliates and/or other entities.

Direct link to market overview. Please click HERE

Additional Information:
Kadri Mätik
Marketing/PR manager
+372 6144 590; +372 50 51 239
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Pre-agreement for the development of shopping centre in Ukraine


Arco Investeeringute AS, a subsidiary of Arco Vara AS signed a pre-agreement to
acquire a 50% stake in a shopping centre development project in Simferopol in
Ukraine. According to the agreement Arco must make a down payment for the stake
in amount of 85,6 mEEK (5,5 mEUR; ,0 mUSD) and in addition plans to provide
subordinated debt in the amount of 235,8 mEEK (15,1 mEUR; ,0 mUSD) alone or
with financial investors.

The final purchase price of the stake depends on the results of legal and
financial due diligence. Until the final share purchase agreement is not signed
the down payment is secured by a guarantee of AS Ühendatud Kapital. The share
purchase agreement should be signed by 30.09.2008 the latest. The seller of the
shares is a subsidiary of the holding company Expert Capital S.A., registered
in Luxemburg.

The project is located on 9,1 Ha of land and is developed in two stages. The
construction of first stage is already underway and includes 14 500 m2
hypermarket. The second phase involves 38 700 m2 shopping mall. The total size
of the project is 53 000 m2 and estimated capex 921,7 mEEK (59,0 mEUR; ,1
mUSD). First phase should be ready already in this summer and second stage in
autumn 2009. Senior loan for the project has been already approved by the board
of directors of EBRD.

“Expansion in foreign markets is Arco's priority. Entering Ukraine market
together with well recognised, experienced and established shopping centre
developer mitigates risks involved in the project . The catchment area of the
centre is 0,5 million people and the city has no contemporary shopping centres.
About 5 million tourists visit the city annually. Arco is considering
investments to similar projects also in the future. However, we have to keep in
mind group liquidity reserves in order to control refinancing risks and to
secure long-term investment capabilities”, says Arco's CEO Mr. Aare Tammemäe.

“Expert Capital is one of the biggest real estate developers in the Ukraine. We
are interested to involve partners in our projects to share risks and
capitalize on partners' experience. Arco Vara is an established real estate
developer in CEE, having 15 years of experience in the region. I believe such
knowledge is of great value for our joint project.”, commented CEO of Expert
Capital Management Mr. Raul Parusk..

Arco Vara is a leading real estate developer in the Baltics, undergoing a CEE
expansion with  presence established in Ukraine, Bulgaria and Romania. The
operations involve real estate  development, brokerage, construction and
investment management arm. The company has offices in 30 cities and has in
total 649 employees. According to 9 months results 2007 consolidated revenues
were 687 mln kroons (44 mln euros), net profit 264 mln kroons (17 mln euros)
and assets 3 536 mln kroons (226 mln euros). Arco Vara is listed on Tallinn
Stock Exchange.

Expert Capital S.A. is a holding company registered in Luxemburg. The core
operations of the company involve real estate development in the Ukraine and
Estonia and the hypermarkets operator in the Ukraine. At the end of last year
the company opened 3 new hypermarkets in Kiev, Krivoj Rog and Zaporozhje.

According to 9 months 2007 results Expert Capital S.A. reported a 297,3 mEEK
(19,0 mEUR) net profit and had total assets of 5 382,4 mEEK (344,0 mEUR). The
group has over 2 000 employees. AS Ühendatud Kapital is a subsidiary of Expert
Capital S.A. and was the owner and manager of Rocca Al Mare shopping centre,
Ehitusservice and Maksimarket buildings on Peterburi road and also a co-owner
of Sikupilli shopping centre, all located in Tallinn, Estonia.

Additional information:
Heigo Metsoja
IRO
+372 6144 654
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.arcorealestate.com

Lauri Reinberg
CFO
Expert Capital Management
+372 666 5940
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