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Creating homes in a
smart way

...directly tapping the market’s pulse

2008


SELECTED FINANCIALS:  
                                                        
Revenue and other income for Q1 totalled 111.9 million kroons (7.1 million     
euros), 67% down year-over-year.  
                                            
Operating loss amounted to 29.7 million kroons (1.9 million euros), a 141%     
decrease from the operating profit of a year ago.        
                     
Net loss was 16.7 million kroons (1.1 million euros), a 124% decrease from the 
net profit earned a year ago.    
                                             
Equity to assets ratio was 54.3% (Q1 2007: 37.2%), return on equity 7.8% (Q1   
2007: 38.6) and return on invested capital 6.2% (Q1 2007: 17.2%).  
           
At 31 March, the Group's order backlog stood at 358.3 million kroons (22.9     
million euros) compared to 331 million kroons (21.1 million euros) in 4th      
quarter.               
                                                       
During the reporting period, 59 apartments and plots were sold or reserved     
compared to 15in the  4th quarter.  

Comments by CEO:     
                                                          
The time of lavish profits and huge returns is over. The Baltic development    
market has stabilised even though less attractively located and lower quality  
properties may undergo further price adjustment.  Although approximately 75% of
Arco's real estate portfolio is located in Estonia, the Group's focus has      
shifted to Ukraine and the Balkans. 
                                          
We anticipated the decline in the profit of the Development division because a 
number of major projects (Tivoli, Ahtri 3, Laeva, Bishumuizhas 2, etc) are still
in the planning phase. The division's Q1 performance indicators (planning,     
construction, vacancies and apartment sales) were positive but the current     
stages of the projects allow recognising only liabilities for reservation fees 
received, not sales revenue. The results of the Development division are subject
to significant fluctuations and the figures for the following quarters may be  
radically different as the projects progress. Q1 highlights include rapid      
progress in the planning of the Tivoli project, investment in a project in     
Simferopol and an en-bloc apartment sale in Sofia. In 2008, plans should be    
adopted for the Laeva, Ahtri and MB-3 projects.   
                            
The Service division performance was lower than expected.. The year will be    
testing and the Service division will end it with a loss despite continuing cost
cutting. Although the performance of the Service division began recovering at  
the end of the previous year the stagnation of the market in Riga and          
reorganization expenses have increased its operating loss.. Nevertheless, the  
Group's market position is strong and the division's performance indicators    
(number of transactions performed and valuation reports issued) have dropped   
substantially less than the market's average                                   

The Construction division continues turning a profit and has displayed strong  
capability for winning environmental engineering tenders in Estonia and Latvia.
Without the sale of major projects or properties and revaluation gain, the     
consolidated result of operations will be considerably weaker than a year ago. 
Winning of tenders in Estonia as well as in Latvia, has increased the proportion
of construction revenue in the Group's revenue structure. The decline in the   
contribution of civil engineering projects and internal sales confirms the     
strategy adopted.                                                              

Demand for centrally located category A commercial real estate has not         
diminished. In Tallinn, vacancies of category A office and commercial premises 
are almost down to zero. Moreover, a 20% fall in construction prices has created
excellent opportunities for executing major long-term development projects such
as Ahtri 3. In 2008, we shall continue developing our Kolde (Estonia) and Madrid
(Bulgaria) projects and intend to take advantage of opportunities provided by  
the slump in the Baltics and the opportunities opening up in Ukraine and the   
Balkans. Accordingly, in 2008 we expect to be a net investor not an achiever of
enhanced development revenue.     

     1. 2008 q1 vahearuanne eng f.pdf
   (
https://newsclient.omxgroup.com/cds/DisclosureAttachmentServlet?messageAttachmentId=1878 96 )
 


Arco Vara sold its 50% holding in AVEC Asset Management AS. After the
transaction East Capital Holding AB is the sole owner of AVEC Asset Management
AS and continues to  manage two property funds- AVEC Baltic Property Fund and
Arco Baltic Real Estate Portfolio.

The final value of the transaction depends on the present value of different
cash flows, that according to current evaluation are equal to 36.5 mln kroons
(2.3 mln euros). 15.6 mln kroons (1.0 mln euros) is received right now and the
rest after the liquidation of AVEC Baltic Property Fund, at earliest on year
2012. The value of the last proceeds to Arco Vara depends on the success fees
paid by the fund to AVEC Asset Management AS.

“It has been partnership where both parties have gained. East capital has
better understanding on property market and Arco has gained necessary
intelligence on fund management operations and therefore added value to all the
businesses in the group. The challenge to Group's different divisions has been
great. We thank East Capital in establishing a great fund management
operations”, says Arco's CEO Mr. Aare Tammemäe.

“Starting a joint venture in 2005 was a good decision for East Capital as
well as Arco Vara. Our cooperation with the leading Baltic real estate company
has been mutually beneficial especially in terms of gaining new knowledge,”
said Gert Tiivas, head of East Capital's Baltic office and the Chairman of the
Board of AVEC Asset Management. “Now, having 100% ownership, we can take full
control and responsibility over the development of business. This is especially
important for East Capital as a long-term investor.”

Arco Vara is a leading real estate developer in the Baltic's, undergoing a SEE
expansion with presence established already in Ukraine, Bulgaria and Romania.
The operations involve real estate development, brokerage, construction and
investment management arm. The company has offices in 29 cities and employs
over 640 people. According to 2007 audited consolidated results net sales was
727 mln kroons (46 mln euros), net profit before minorities 235 mln kroons (15
mln euros) and assets 3 564 mln kroons (228 mln euros). Arco Vara is listed on
Tallinn Stock Exchange.

1 EUR=15,6466 EEK

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


According to the decision of Tallinn municipality, Tallinn city gives to Arco
Investeeringute AS, a subsidiary of Arco Vara AS, 5,0 ha of residential land.
In return Arco Investeeringute AS must give to the city 10,7 ha of social and
transportation land, pay 22,5 mln kroons (1,4 mln euros) and make
infrastructure investments according to initial evaluation in amount of 18,0
mln kroons (1,1 mln euros).

Including existing land position and zoning rights in the project Arco will
have in total 56 land plots with total area of 6,8 ha.

According to the head of Arco's development division Mr. Veiko Taevere the
decision enables to complete the project finally. “It's great to know that
after long and complicated negotiations the compromise satisfies both parties
and we are able to complete the residential district. Sales activities will
start in spring”.

Arco Vara is a leading real estate developer in the Baltic's, undergoing a SEE
expansion with presence established already in Ukraine, Bulgaria and Romania.
The operations involve real estate development, brokerage and construction arm.
The company has offices in 29 cities and employs over 640 people. According to
2007 audited consolidated results net sales was 727 mln kroons (46 mln euros),
net profit before minorities 235 mln kroons (15 mln euros) and assets 3 564 mln
kroons (228 mln euros). Arco Vara is listed on Tallinn Stock Exchange.

1 EUR=15,6466 EEK

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

 


Arco Vara AS informs the change in the qualifying holding of share capital.

Mr. Toomas Tool, the shareholder of Arco Vara AS notified Arco Vara AS on 8 July 2008 of the acquisition of 5,0 mln shares of Arco Vara AS as private person, which constitutes 5,25% of the share capital of Arco Vara AS.


On 13 May 2008 the General Meeting of Shareholders of AS Arco Vara (Arco Vara) authorized Arco Vara to buy back its own shares in five years, provided that such buy back shall not exceed 10% of the aggregate value of issued nominal share capital of Arco Vara. The authorized maximum number of shares which can be acquired is thereby 9 528 415.

On 9 July 2008 the Management Board of Arco Vara decided to initiate the share buyback program in accordance with the resolution of General Meeting of Shareholders. Based on the Management Board decision the aggregate consideration under this program will be 4.0 million Estonian kroons (0.26 million euros) and maximum of 450 000 shares may be acquired. The program will start on 10 July 2008 and will end on 5 September 2008.

The purpose of the program is to reduce the capital of Arco Vara or to use the acquired shares for planned employee share option scheme as the Management Board believes current share price level and liquidity position of the group provide a favourable opportunity for this purpose.

The share buyback program is conducted in compliance with the provisions of the European Commission's regulation No. 2273/2003 of 22 December 2003, stating the exemptions for share buyback programs. Arco Vara has appointed SEB Pank as lead manager of the program to buy the shares back on behalf of Arco Vara under separate agreement. SEB Pank will be independent on its trading decisions irrespective of and without influence from Arco Vara as to the timing of the purchases as well as carry out the buyback according to the regulations and within the framework of the program.

The share buyback will be initiated under the following framework:

1) The maximum amount of shares bought will not exceed 450 000 shares, which corresponds to 0.47% of the issued share capital of Arco Vara;

2) The maximum aggregate consideration for the Arco Vara shares bought will not exceed 4.0 million Estonian kroons (0.26 million euros);

3) In one single day the amount of shares bought will not exceed 25% of the average daily volume of Arco Vara shares traded in the 20 preceding trading days on the Tallinn Stock Exchange. In case of extreme low liquidity of the share the company may exceed the 25% limit in which case the amount of shares bought will not exceed 50% of the average daily volume traded in the 20 preceding trading days.

4) The purchase price:

a) does not exceed the share price of the last independent trade; and

b) does not exceed the highest current independent bid of Arco Vara share on Tallinn Stock Exchange; and

c) is not less than half of the nominal value of the share.

Arco Vara does not own currently any of its own shares. At least every seven trading days from the start of this program Arco Vara will give an update about the status of the program by issuing an announcement in respect of the transactions made under the program.

 


Arco Vara AS issued 12 month commercial papers in nominal value of 66.5 mln kroons (4.25 mln euros) with interest of 12.0% per annum.

The funds are used to refinance existing commercial papers and to finance investments in Ukraine.

1 EUR=15.6466 EEK