INTERIM REPORT FOR THE THIRD QUARTER OF 2025 (UNAUDITED)
GROUP CEO'S REVIEW
The Estonian real estate market in the third quarter of 2025 was characterized
by stable and moderately recovering activity. The number of transactions
remained at a comparable level to the previous quarter, indicating that the
market is adapting after the cooling of recent years. The average price per
square meter of apartments showed a slight upward trend, particularly in the
more active areas of Tallinn, where demand for high-quality residential space
remains strong.
The market continued to be influenced by high interest rates and buyer caution,
which kept transaction activity under control. At the same time, improved
confidence and stabilized economic expectations supported steady demand.
Overall, the situation suggests that the Estonian real estate market has reached
a phase of balance - following periods of rapid growth and sharp decline, both
prices and transaction volumes have stabilized. Provided the macroeconomic
environment remains stable and interest rates begin to decline, moderate market
recovery can be expected in the first half of 2026, particularly in the new
development segment.
One of the most notable events of the quarter for Arco Vara was its first public
bond offering, which attracted exceptionally strong investor interest and was
oversubscribed more than twofold. This marks the largest single bond issue among
real estate developers listed on the Baltic stock exchanges to date.
The purpose of the bond issue was to finance the development of the Luther
Quarter - one of the largest urban projects in central Tallinn - transforming a
historic industrial area into a modern residential and business environment.
Arco Vara's vision for the Luther Quarter is to create a balanced and human-
scale urban space that combines homes, workplaces, cafés, culture, and high-
quality public areas. At the heart of the quarter, a green area is planned for
public use, supporting the creation of an integrated living environment.
Our goal is not merely to construct new buildings, but to create a "city within
a city" - a vibrant and versatile quarter where life unfolds around the clock,
offering a pleasant environment for living, working, and leisure. Tallinn needs
more comprehensive urban solutions - residential quarters that function as
independent environments while remaining organically connected to the
surrounding city structure.
Rannakalda development: Five apartments were sold in the third quarter,
reflecting continued interest in high-quality residential properties near the
city center. By the end of the quarter, 101 out of 113 apartments/commercial
units had been sold. The sales target is to complete the sale of the remaining
units by the end of 2025.
Soodi 6 development: Construction works began on 30 June. By the end of the
quarter, 19 out of 66 apartments/commercial units had been sold under binding
preliminary agreements. The project is attractive to young families, investors,
and more demanding clients thanks to its excellent location and well-thought-out
layouts.
Spordi development: Construction also began in June. By the end of the quarter,
12 out of 56 apartments had been sold under preliminary agreements - a
significant sales result achieved within just four months. The Spordi project
enhances Arco Vara's portfolio with a development in a highly desirable
Kristiine district location, where new projects are scarce but housing demand
remains high. The project features modern and smart solutions.
Arcojärve development: The detailed spatial plan was approved after the
reporting period, on 15 October. This is a strategically important project that
lays the foundation for further investments in new inner-city developments.
Bulgarian development: Arco Vara initiated a strategic exit from the Bulgarian
market to focus on development projects in Estonia and enhance operational
efficiency and value creation. Negotiations regarding the Bulgarian subsidiary
are ongoing, and decisions will be made shortly in coordination with the
Supervisory Board.
Kuldlehe development: One apartment was reserved and one sold at the end of
August. Only one apartment remains available, whose exclusive character and
limited availability keep the project well-positioned in Tallinn's premium
segment.
The main objectives for the fourth quarter focus on active sales efforts and the
steady progress of development projects. Priorities include selling the final
apartment in the Kuldlehe development and realizing at least six additional
units in the Rannakalda project. Preparations will also begin for the presale of
the first phase of the Luther development. Construction and active sales will
continue at the Spordi and Soodi 6 developments, with the goal of signing at
least six additional preliminary agreements for each project by the end of the
year.
In summary, the third quarter of 2025 was a period of stable progress and key
achievements for Arco Vara. The quarter was marked by a successful first public
bond issue, ongoing construction across several developments, and accelerated
sales activity. The advancement of preparations for the Luther Quarter and the
approval of the Arcojärve detailed plan provide a strong foundation for the
company's next strategic steps. Arco Vara's position in the Estonian real estate
market remains solid, built on well-considered developments, quality, and
sustainable growth.
KEY PERFORMANCE INDICATORS
The Group's sales revenue for the first nine months of 2025 amounted to EUR
5,624 thousand, which is EUR 1,537 thousand more than in the same period of
2024. For the first nine months of 2025, the Group recorded an operating profit
(=EBIT) of EUR 622 thousand and a net profit of EUR 214 thousand. In comparison,
during the first nine months of 2024, the Group incurred an operating loss
(=EBIT) of EUR 158 thousand and a net loss of EUR 845 thousand.
In Q3 2025, a total of 25 apartments were sold in the Group's development
projects, including 20 under preliminary purchase agreements and 5 under real
right contracts. During the first nine months of 2025, 35 apartments were sold,
21 under preliminary purchase agreements and 14 under real right contracts. For
comparison, in Q3 2024, 10 apartments and 2 commercial units were sold in the
Group's development projects (7 apartments under real right contracts, 3
apartments, and 2 commercial units under preliminary purchase agreements). A
total of 17 apartments and 2 commercial units were sold during the first nine
months of 2024 (14 apartments under real right contracts, 3 apartments, and 2
commercial units under preliminary purchase agreements).
As of 30 September 2025, the inventory included 12 completed apartments and 1
commercial unit, compared to 37 completed apartments and 1 commercial unit as of
30 September 2024.
As of 30 September 2025, the Group's total assets had more than doubled compared
to 30 September 2024. The main reason for the increase in assets was the
acquisition of new development projects, including the Luther Quarter and Spordi
3a/3b development projects.
As of the end of the first nine months of 2025, the Group's net debt amounted to
EUR 47,407 thousand, which is EUR 31,585 thousand higher than at the end of the
same period in the previous year. The increase in net debt was mainly due to the
acquisition of the Luther Quarter, which was partially financed with a bank
loan. In addition, during the third quarter of 2025, the Group issued bonds
totaling EUR 15,000 thousand. The weighted average interest rate on the Group's
interest-bearing liabilities was 9.09% as of 30 September 2025.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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In thousands of euros 9 months 2025 9 months 2024 Q3 2025 Q3 2024
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Revenue from sale of own real
estate 5,260 3,872 2,407 2,075
Revenue from rendering of services 365 214 124 78
Total revenue 5,624 4,087 2,531 2,154
Cost of sales -3,953 -2,850 -1,884 -1,474
Gross profit 1,672 1,237 647 680
Other income 2 0 2 0
Marketing and distribution
expenses -328 -405 -135 -186
Administrative expenses -718 -971 -156 -340
Other expenses -5 -18 -1 -2
Operating profit 622 -158 357 152
Financial costs -396 -687 -101 -309
Profit/ loss before tax 226 -845 256 -157
Income tax -13 0 0 0
Net profit/ loss for the period 214 -845 256 -157
Total comprehensive profit/ loss
for the period 214 -845 256 -157
Attributable to owners of the
parent 214 -845 256 -157
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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In thousands of euros 30 September 2025 31 December 2024
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Cash and cash equivalents 13,106 1,720
Receivables and prepayments 7,176 5,690
Inventories 70,721 29,170
Total current assets 91,003 36,580
Receivables and prepayments 18 18
Investment property 2,296 2,296
Property, plant and equipment 570 622
Intangible assets 46 52
Total non-current assets 2,930 2,988
TOTAL ASSETS 93,933 39,568
Loans and borrowings 235 234
Payables and deferred income 8,894 4,487
Warranty provisions 345 127
Total current liabilities 9,475 4,848
Loans and borrowings 47,056 14,981
Total non-current liabilities 47,056 14,981
TOTAL LIABILITIES 56,531 19,829
Share capital 12,158 7,272
Share premium 16,399 3,835
Statutory capital reserve 2,011 2,011
Other reserves 28 27
Retained earnings 6,807 6,594
Total equity attributable to owners of the
parent 37,402 19,739
TOTAL EQUITY 37,402 19,739
TOTAL LIABILITIES AND EQUITY 93,933 39,568
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Darja Bolshakova
CFO
Arco Vara AS
www.arcovara.com (http://www.arcovara.com)