Tarmo Sild is the new member of the management board of Arco Vara AS.
The supervisory board of Arco Vara AS has decided to recall the company’s present member of the management board Lembit Tampere and to appoint Tarmo Sild (37) as the group’s new member of the management board. Arco Vara has a one-member management board.
According to the resolution of the supervisory board, the powers of Tarmo Sild will take effect as of 22 October. Lembit Tampere will step down from the management board of Arco Vara on the same day. Lembit Tampere will be removed from all supervisory and management boards of the subsidiaries and associates of Arco Vara.
The change of the member of the management board is related to changes that have taken place during the year on the supervisory board, which has resolved to appoint a new CEO to implement its vision.
The supervisory board has some significant and unresolved questions about the balance sheets of various entities of Arco Vara group and the sustainability of the business plans of some group companies, particularly as regards the construction division and foreign operations. The management board has to analyse the reasons for the group’s poor performance promptly and with due care and to draw appropriate conclusions. The supervisory board is of the opinion that Arco Vara group has to seek new development opportunities and to increase the volume and pace of developments for which there is market demand so as to remain competitive and to be a justified investment for the shareholders. The supervisory board does not rule out the possibility that the management board may have to write down some of the group’s assets and to implement additional measures for cutting overheads and improving management efficiency.
Tarmo Sild has been assigned to stabilise, restructure and refinance Arco Vara group and to restore the group’s profitability, particularly in the area of real estate development.
Tarmo Sild has no shares in Arco Vara AS. According to his contract, share options will be part of the motivation package.
Brief CV of Tarmo Sild
University of Tartu; Faculty of Law, B.A.; 1998
University of Helsinki; Faculty of Law, further studies; 1997-1998
Vrije Universiteit Brussel; PILC; LL.M (cum laude); 1999
1998 – 2003 Law office HETA, attorney at law and member of the management board
2003 – 2012 Law office LEXTAL, founder, attorney at law, member of the management board, counsel
Since 2000 – MFV Lootus OÜ, founder, member of the management board
Since 2008 – AS IuteCredit Europe, founder, member of the management board
Arco Vara AS
Tel: +372 614 4503
Regarding Arco Vara's new member of the management board
In connection with the information published in the Estonian media regarding the criminal record of the new CEO of Arco Vara AS,Tarmo Sild, Arco Vara deems it necessary to specify the following facts:
1. Tarmo Sild has been punished for committing an offence set forth in section 295 (1) of the Estonian Penal Code, i.e. for arranging receipt of gratuities, with a pecuniary fine of 102,870 Estonian kroons (approx. EUR 6,575). The judgement entered into force on 26 May 2010.
2. Tarmo Sild paid the fine imposed on 2 June 2010. By law, the criminal record of a person having committed an offence set forth in section 295 (1) of the Penal Code is deleted when three years have passed since the time the punishment was served.
3. The offence was committed in summer 2006. Based on the statement of charges, the offence did not result in any material damage to the state.
4. Tarmo Sild did not leave the Estonian Bar Association based on the judgement of the court as has been mistakenly claimed by the media. Tarmo Sild left the Estonian Bar Association at his own request on 12 January 2010. Sild explained his leaving as follows: “After having worked for ten years as an attorney, my focus has increasingly shifted on the business of companies in which I have an interest, some of which operate outside Estonia.”
5. On selecting the new member of the management board, the supervisory board of Arco Vara considered both the above circumstances and the fact that in the current situation, which has already been described in the stock exchange announcement of 16 October 2012, the interests of Arco Vara AS and its shareholders have to come first.
Chairman of the Supervisory Board
Arco Vara AS
Tel: +372 614 4630
16.11.2012: Arco Vara AS Interim report for III quarter and 9 months 2012
Group Chief Executive’s review
In the third quarter of 2012, the most important internal developments for Arco Vara AS were changes on the supervisory board and in the Group’s structure and staffing.
In our second quarter report we informed you about the resignation of three members of the supervisory board and the election of three new members - Toomas Tool, Stephan David Balkin and Aivar Pilv. At an extraordinary general meeting, which convened on 30 July 2012, the supervisory board was further strengthened by the election of Arvo Nõges and Rain Lõhmus. The new board members’ contribution to the Group’s development has triggered reshuffling aimed at modernising the Group’s management and improving internal efficiency. We are not planning any other major staffing changes. From now on, we are going to focus on utilising our existing resources more effectively and streamlining our management structure (mostly by reducing the formal levels of management and simplifying the decision-making and accountability mechanism).
In the third quarter, we reduced the number of staff by 23 (by 13 in Estonia, 5 in Latvia and 5 in Bulgaria).
The structural change in Latvia was aimed at gaining complete control and ownership of the Bišumuiža apartments, which from the point of view of further development constitute assets with additional profit potential, and dividing the Mazais Baltezers plots, which are located in naturally beautiful surroundings near Riga, with the former Latvian development partner.
In other respects, we continued our ordinary business operations.
Development operations in Estonia
Development operations in Latvia
Development operations in Bulgaria
Action plan for the fourth quarter
KEY PERFORMANCE INDICATORS
REVENUE AND PROFIT
In 2011, the Development division’s revenue was significantly impacted by the sale of inventory of 8.3 million euros to the joint venture Tivoli Arendus OÜ.
At 30 September 2012, the largest current liabilities to be settled in the next 12 months comprised:
In the reporting period, we made repayments of the loans taken for the Bišumuiža 1 project in Riga, the Baltezers 5 project near Riga, the Kodukolde project in Tallinn, the Manastirski project in Sofia and repaid the Kerberon loan in full.
In addition, we made scheduled repayments of the loans taken for our cash flow generating projects, Madrid and Pärnu market, and followed the principal repayments schedule agreed for the bank loan taken by Arco Real Estate AS (previously the loan of Koduküla OÜ).
In the first nine months of 2012, the Service division performed better than in the comparative period, generating an operating profit of 663 thousand euros (includes non-recurring income of 556 thousand euros from the reassessment of the carrying values of liabilities performed on the merger of companies) compared with an operating profit of 91 thousand euros a year ago. Revenue for the first nine months of 2012 was 1,927 thousand euros, 9% up on the first nine months of 2011. The number of brokerage transactions increased by 6% and the number of valuation reports issued grew by 8% year over year. At the same time, the number of brokers has increased by 1% and the number of appraisers by 31%.
In the first nine months of 2012, Arco Vara sold 53 apartments and four plots in its own projects: five apartments in the Bišumuiža project and four plots in the Baltezers project in Latvia and 37 apartments in the Kodukolde project in Estonia. In addition, in the third quarter we sold 11 apartments in the Manastirski project in Bulgaria. It should be noted that the Bulgarian sales figures do not yet include all the apartments sold in the Manastirski project. The sales of 46 apartments are still being finalised. Respective revenue will be recognised from the fourth quarter onwards.
In June, the division completed phase VI of the Kodukolde development project at Helme 16 in Tallinn, which consists of two apartment buildings with a total of 48 apartments. Out of the latter, 35 were sold during the second and third quarter (under real right contracts). In October four more apartments were sold. At the reporting date, the inventory of the project included nine unsold apartments, four of which were reserved.
In the fourth quarter of 2011, Tivoli Arendus OÜ obtained a permit for the construction of six residential buildings. The design and build contract with Nordecon AS was signed in May 2012. Because of the time required for making changes to the design documentation and obtaining appropriate approvals, commencement of construction operations has been scheduled for winter 2012-2013.
In January 2012, the division obtained a permit for the construction of a residential and commercial building of energy class B called Kastanimaja (Chestnut House), designed to be located at Tehnika 53 in Tallinn. The work was put out to tender in the first quarter and the construction contract with AS Parmeron was signed in June. According to plan, construction work will be completed in 12 months. Pre-sale of apartments, which began in May 2012, has been successful: by the end of the third quarter 11 of the 14 apartments were covered with contracts under the law of obligations (under Estonian legislation, in a real estate transaction a contract under the law of obligations is signed when the buyer makes a prepayment and the parties agree the terms and conditions of sale, thus it is essentially a presale contract; title to the property transfers under a real right contract, which is usually signed when the real estate is complete).
In Bulgaria, the construction of phase I of the Manastirski project has been completed. At 30 September 2012, 77% of the 74 apartments were reserved or sold. In the commercial and residential building Boulevard Residence Madrid in Sofia the division continues to lease out commercial premises, to deliver reserved apartments under real right contracts, and to sell the remaining free apartments.
In the Bišumuiža 1 project in Latvia further development and construction has been suspended. There are two buildings of 14 apartments each in different stages of completion. The completed phases include three unsold apartments.
In April 2012 we divested our stake in the joint venture Bišumuižas Nami SIA to the co-venturer SIA Linstow Baltic. Arco Vara sought possibilities for exiting the project for over a year. Through the transaction, the Group disposed of the obligation to support the joint venture in the development of apartment buildings and in servicing loan liabilities. Bišumuižas Nami SIA’s loan liabilities totalled 14 million euros.
In July, we completed the merging of some small project companies. Arco Vara Ärikinnistute OÜ, OÜ Waldrop Investments and AIP Projekti OÜ were merged with Fineprojekti OÜ.
Through a transaction finalised on 5 September 2012, the Latvian development entity Arco Development SIA was divided into two companies - Arco Development SIA and Newcom SIA. By the transaction, Newcom SIA acquired some of the assets and liabilities that used to belong to Arco Development SIA. As a result of the transaction, Arco Investeeringute AS became the sole owner of Arco Development SIA and the former non-controlling shareholder Viktors Savins became the sole owner of the new entity Newcom SIA. The transaction was undertaken to enable the non-controlling shareholder to exit from the investment in Arco Development SIA.
At the end of September 2012, the Development division employed 12 people (30 September 2011: 24).
For further information on our projects, please refer to: www.arcorealestate.com/development.
The Construction division specialises in environmental and civil engineering.
At the end of the third quarter of 2012, the largest contracts in progress were the construction of the Paide wastewater treatment plant (remaining balance 2.6 million euros) and the construction of the Kuusalu public water and wastewater network (remaining balance 2 million euros).
In the third quarter of 2012, the division secured new construction contracts of 0.4 million euros. At the reporting date, the order backlog stood at 4.5 million euros compared with 8.6 million euros at the end of the third quarter of 2011.
At the end of September 2012, the Construction division employed 40 people (30 September 2011: 58).
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
On 23.11.2011, the Bulgarian subsidiary Arco Invest EOOD of Arco Investeeringute AS (subsidiary of Arco Vara AS 100%) and Cleves EOOD signed an instrument of delivery and receipt concerning delivery of 21 apartments and 13 parking places of Boulevard Residence. The value of the completed transaction was 4.3 mln euros.
It was the first stage of the transaction consisting of two parts. In addition to the abovementioned transaction, Cleves EOOD undertook to buy by the end of 2012 another 16 apartments and 18 parking places at a price of 2.8 mln euros. All the abovementioned sums contain 20% VAT enforceable in Bulgaria.
In December, 2012, Cleves EOOD announced that due to the prevailing market and banking conditions in Bulgaria they decided not to proceed with the purchase and in accordance with the mutual agreement between the parties, Arco Invest EOOD was paid 235 469 euros on 20.12.2012. The parties do not have any claims against each other and are open to co-operation in the future.
Boulevard Residence is located in the centre of Sofia, in Madrid Boulevard. There are 87 apartments and an underground car park for 164 cars in the building with a total area of 25 000 m2. In addition to that, there are commercial premises and modern office premises on the first three floors of the building.
The residential and business building development project “Madrid“ in the city centre of Sofia was completed in June, 2010. At the moment, sale of vacant apartments and letting of rental premises is going on in the business and residential building. Additional information: http://www.arcoinvest.bg.
Arco Vara AS
Phone: +372 614 4503