GROUP CEO'S REVIEW
The first quarter of 2025 continued the moderate recovery in Estonia's real estate market that began at the end of 2024. Despite the generally cautious economic sentiment, the market remained stable and showed the first credible signs of revitalization. The continued decline of the Euribor, alongside stabilizing inflation, contributed to increased transaction activity and consumer interest, particularly within the residential segment.
The new development market in Tallinn remained active throughout the quarter. Although no record-breaking sales were achieved, interest remained strong, and price levels stabilized. In the Rannakalda development, Arco Vara sold four additional apartments in Q1 2025, bringing the total number of units sold to 91 out of 113. The pre-sales in the Soodi 6 project continued at a calm pace, with 10 out of 66 apartments pre-sold by the end of the quarter. The building permit process for the start of construction is in its final stage, with construction expected to commence at the end of Q2 2025.
During the first quarter of 2025, Arco Vara acquired a new development site in Tallinn on Spordi Street. The property, located in an attractive area suitable for residential development, expands Arco Vara's project portfolio in sought-after districts of Tallinn. Pre-sales for the project are scheduled to begin in Q2 2025, with construction work planned to start toward the end of the same quarter. Initial planning and preparatory works are currently underway.
The final stage of the Kodulahe development, located at Lammi 6, also made progress. The detailed planning process continued, and in cooperation with the district government, significant advances were made, allowing the project to move forward. Construction is anticipated to start in approximately two years.
Preparatory work for Arco Vara's next major development, Arcojärve, is progressing according to plan. Efforts are focused on developing design solutions, enhancing the project's added value, and mapping out potential target customer groups. The project has already attracted considerable interest, and our primary goal is to secure the approval of the detailed plan in the coming months. Construction is scheduled to begin at the end of 2025.
In Bulgaria, the local team brought the Botanica Lozen project even closer to completion, reaching 95% readiness by the end of the quarter. The entire development is expected to be finalized by the end of Q2 2025. Sales activity in Botanica Lozen remained stable, with 9 of the 16 houses sold by quarter-end. The project's appeal was further enhanced by the near-completion of landscaping work, aligning well with the preferences of local buyers.
The Merivälja Kuldlehe development maintained its prestigious and exclusive market position. Although no new transactions were recorded during the quarter, interest in the apartments remained steady. Given the development's high market value and unique location, full realization largely depends on overall market confidence and the recovery of purchasing power among the target audience. To date, 2 of the 5 apartments have been sold.
From a broader market perspective, the real estate sector continued on a cautious yet positive trajectory. The number of transactions remained stable or slightly increased compared to the previous quarter, suggesting that the most severe economic challenges have likely passed. The gradual decline in interest rates and renewed investor confidence provide a solid foundation for continued strengthening of the real estate market in the second half of 2025.
Arco Vara's key near-term challenges remain consistent: achieving successful sales in the Kodulahe and Kuldlehe projects in Estonia, and finalizing the sale of the remaining homes in the Botanica Lozen development in Bulgaria. The main focus of sales activity is on completed apartments and houses to ensure stable cash flow and enable the successful launch of upcoming large-scale projects.
In summary, Q1 2025 was a period of stability and preparation, with the real estate market moving quietly but steadily toward recovery.
KEY PERFORMANCE INDICATORS
In Q1 2025, the group's sales revenue was 1,706 thousand euros, which is 716 thousand euros more than the sales revenue of the Q1 2024 of 990 thousand euros.
In Q1 2025, the group's operating profit (=EBIT) was 259 thousand euros and net profit 103 thousand euros. In Q1 2024, the group's operating loss (=EBIT) was 208 thousand euros and net loss 349 thousand euros.
In Q1 2025, 4 apartments were sold. In Q1 2024, 3 apartments and 1 commercial premise were sold. As of 31.03.2025, 24 apartments were ready in stock.
In the first 3 months of 2025, the group's debt burden (net loans) increased by 1,960 thousand euros up to the level of 15,455 thousand euros as of 31 March 2025. As of 31 March 2025, the weighted average annual interest rate of interest-bearing liabilities was 8.2%. This is a decrease of 0.5 percentage points compared to 31 December 2024.
OPERATING REPORT
The group's sales revenue was 1,706 thousand euros in Q1 2025 (Q1 2024: 990 thousand euros), including the sale of real estate in the group's own development projects 1,589 thousand euros (927 thousand euros in Q1 2024).
Other sales revenue in 2025 mainly includes revenue from franchise fees of real estate agencies in Estonia, Latvia and Bulgaria. Franchise fees for the Q1 2025 were 65 thousand euros, franchise revenues for the Q1 2024 were 55 thousand euros.
62 apartments and 4 commercial premises in the form of three buildings will be built at Soodi 6. By the time this report is published, 8 apartments and 2 commercial premises have been presold. The homes are schedules to be completed in 2026.
In the most premium phase of Kodulahe, Rannakalda, a pavilion, 4 service areas and 108 apartments (as three separate apartment buildings), many of which have a sea view, have been completed. As of the publication date of the quarterly report, 21 of the 113 are vacant.
A subsidiary of Arco Vara, Arcojärve OÜ, in 2021 signed an agreement for land acquisition beside Lake Harku, address Paldiski road 124b, Tallinn. More than 35,000 m2 of residential and commercial real estate (GBA) is planned for development. The project is called Arcojärve. The subsidiary of Arco Vara is obliged to pay an additional 1,627 thousand euros for the purchase of the land within three months from the establishment of the detailed plan for the property by the Tallinn City Government, but no later than 30.04.2026. The start of the construction of the first stage is planned for 2025.
In the Kuldlehe project, an exclusive cluster house with 5 spacious homes was built in Pirita. By the date of publication of the quarterly report, 3 out of 5 apartments are vacant.
The Botanica Lozen project foresees construction of 54 homes (houses) in three stages. Construction and sales of the first 16 buildings have begun - the private houses of the first phase will be completed in Q2 2025. By the date of publication of the quarterly report, 9 out of 16 houses have been pre-sold.
Kerberon OÜ, a subsidiary of Arco Vara, developed a fully automatic padel venue with six indoor courts at Helme 18 with the help of the construction company Arco Tarc OÜ. The hall is rented out on a full lease agreement and is open to guests.
In Q1 2025 the group acquired a property with building permit at Spordi 3a, 3b Kristiine Tallinn. The development will consist of two buildings and 7,600 m2 of residential real estate (gross building area) with an underground parking lot. The buildings will have a total of 56 apartments, several of which have a balcony or terrace. The total investment in the project is 15 million euros. Pre-sales of Spordi 3a and 3b apartments will begin in the Q2 2025, and homeowners will receive the keys by the end of 2026. The buildings will be built by Arco Vara's construction company Arco Tarc OÜ.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| In thousands of euros | Q1 2025 | Q1 2024 |
| Revenue from sale of own real estate | 1,589 | 927 |
| Revenue from rendering of services | 117 | 63 |
| Total revenue | 1,706 | 990 |
| Cost of sales | -1,108 | -817 |
| Gross profit | 598 | 173 |
| Marketing and distribution expenses | -69 | -70 |
| Administrative expenses | -270 | -297 |
| Other expenses | 0 | -14 |
| Operating profit | 259 | -208 |
| Financial costs | -143 | -141 |
| Profit/ loss before tax | 116 | -349 |
| Income tax | -13 | 0 |
| Net profit/ loss for the period | 103 | -349 |
| Total comprehensive profit/ loss for the period | 103 | -349 |
| Attributable to owners of the parent | 103 | -349 |
| Earnings per share (in euros) | ||
| - basic | 0.01 | -0.03 |
| - diluted | 0.01 | -0.03 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| In thousands of euros | 31 March 2025 | 31 December 2024 |
| Cash and cash equivalents | 1,113 | 1,720 |
| Receivables and prepayments | 6,310 | 5,690 |
| Inventories | 32,329 | 29,170 |
| Total current assets | 39,752 | 36,580 |
| Receivables and prepayments | 18 | 18 |
| Investment property | 2,296 | 2,296 |
| Property, plant and equipment | 605 | 622 |
| Intangible assets | 57 | 52 |
| Total non-current assets | 2,976 | 2,988 |
| TOTAL ASSETS | 42,728 | 39,568 |
| Loans and borrowings | 235 | 234 |
| Payables and deferred income | 6,203 | 4,487 |
| Warranty provisions | 115 | 127 |
| Total current liabilities | 6,553 | 4,848 |
| Loans and borrowings | 16,333 | 14,981 |
| Total non-current liabilities | 16,333 | 14,981 |
| TOTAL LIABILITIES | 22,886 | 19,829 |
| Share capital | 7,272 | 7,272 |
| Share premium | 3,835 | 3,835 |
| Statutory capital reserve | 2,011 | 2,011 |
| Other reserves | 27 | 27 |
| Retained earnings | 6,697 | 6,594 |
| Total equity attributable to owners of the parent | 19,842 | 19,739 |
| TOTAL EQUITY | 19,842 | 19,739 |
| TOTAL LIABILITIES AND EQUITY | 42,728 | 39,568 |
Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com
