GROUP CEO'S REVIEW
Rait Riim, CEO and Member of the Management Board of Arco Vara AS:
"The first quarter of 2026 developed largely as expected for Arco Vara, with the company maintaining its focus on advancing its ongoing development projects. During the quarter, a change also occurred in the company's management, and as of 1 April, I have assumed the role of Chief Executive Officer of Arco Vara.
I have more than 20 years of experience in the real estate sector and joining Arco Vara represents an opportunity for me to contribute to the company's next phase of development. Arco Vara's ambition is to be a real estate developer recognized as a benchmark for urban space and living environment quality, sustainability, and long-term value creation. It is important that a developer does not merely construct buildings but creates holistic environments that homeowners take pride in and whose value grows over time.
The strength of the company's development portfolio and the potential of its next growth phase provide the opportunity to execute large-scale and urbanistically significant projects, which require a clear strategic vision and strong financial discipline. My strategic objective includes expanding and diversifying Arco Vara's product portfolio-moving beyond fully developed apartment districts into segments such as terraced houses, detached homes, and undeveloped plots, while also diversifying across different price segments. In line with this, Arco Vara is open to acquisition opportunities for development land in Tallinn and its surrounding areas with established detailed plans.
In accordance with the company's Articles of Association, my mandate as CEO has been granted for a term of three years.
The Estonian real estate market in the first quarter of 2026 was characterized by seasonal calmness. There were no significant changes in transaction prices or volumes. In the early months of the year, the market was positively influenced by signs of improvement in Estonia's economic growth environment. Negative factors included high electricity prices in January and February, rising interest rates, and geopolitical developments in the Middle East in March. We observe that homebuyers are increasingly adapting to the surrounding instability and are more willing to enter into contracts for homes that will be completed in the future.
The loss incurred by the company during the quarter reflects the cyclical nature of real estate development projects-losses are generated during the planning and construction phases, while profits are realized upon completion of the buildings. Currently, Arco Vara has 122 apartments and commercial units under construction in Tallinn, all scheduled for completion in the fourth quarter of this year.
Below is an overview of the company's activities by development project:
Kodulahe Quarter, Lammi 8 development: The residential building has been completed, and as of the end of the quarter, only four apartments and one commercial unit remain unsold out of 113 units. During the first quarter, one apartment was sold. The plan is to sell the remaining units in the coming quarters.
Kodulahe Quarter, Soodi 6 development: Construction, which began in June 2025, has reached its halfway point. By the end of the quarter, 28 out of 66 apartments and commercial units had been sold under preliminary contracts. The project is attractive to families, investors, and more demanding clients due to its good location and well-designed layouts. Construction will be completed in the fourth quarter of this year.
Spordi 3a/3b development: Construction, which also began in June 2025, has reached its halfway stage. By the end of the quarter, 17 out of 56 apartments had been sold under preliminary contracts. The Spordi Street development enhances Arco Vara's portfolio with a prime location in the Kristiine residential district-an area with limited new developments but strong demand. Construction will be completed in the fourth quarter of this year.
Arcojärve development: The detailed planning process is ongoing. The detailed plan was adopted by the local municipality on 15 October 2025, followed by a public display. We are currently awaiting its approval. In parallel, we have prepared building designs for new structures and infrastructure to enable immediate application for building permits once the detailed plan is approved. Arcojärve is a strategically important project for Arco Vara, creating a foundation for further investments in new urban developments.
Luther Quarter development: The Luther Quarter is the flagship development of Arco Vara. A "city within a city" is being created within and around the historic plywood factory walls, combining the heritage of Luther with modern urban living. The development includes 454 residential units and approximately 18,500 m² of commercial space. During the quarter, we focused on the design phase of the first construction stage and began mapping potential buyer interest.
Kuldlehe development: Located in Merivälja, only one residential unit remains available. Its exclusive nature and limited supply maintain a strong position in Tallinn's premium segment.
Bulgaria development: On 13 March, Arco Vara entered into an agreement to involve a strategic local partner, under which Kamaleo Invest OOD will acquire a 25% stake in Botanica Lozen EOOD for a total of EUR 2,200,000. The first phase of the Botanica Lozen development is nearing completion, with single-family houses and villas expected to be handed over to buyers in the coming quarters.
The main objectives for the second quarter are to continue construction and sales activities in the Spordi 3a/3b and Soodi 6 developments, as well as the design work for the Luther Quarter. Arco Vara's position in the Estonian real estate market remains solid, supported by well-conceived developments, quality, and sustainable growth."
KEY PERFORMANCE INDICATORS
The Group's revenue for the first three months of 2026 was EUR 390 thousand, which is EUR 1,316 thousand lower than in the same period of 2025.
The Group recorded an operating loss (EBIT) of EUR 483 thousand and a net loss of EUR 578 thousand for the first three months of 2026. In the same period of 2025, the Group reported an operating profit of EUR 260 thousand and a net profit of EUR 104 thousand.
In the first quarter of 2026, the Group sold 8 apartments in its development projects, including 7 under preliminary contracts and 1 under a real right contract. For comparison, in the first quarter of 2025, 4 apartments were sold under real right contracts, and no preliminary contracts were concluded.
As of 31 March 2026, the Group had 7 completed apartments and 1 commercial unit in inventory, compared to 24 apartments and 1 commercial unit as of 31 March 2025.
As of the end of the first three months of 2026, the Group's net loan position amounted to EUR 41,300 thousand, which is EUR 25,845 thousand higher than at the end of the same period last year. The increase in debt is mainly attributable to the acquisition of the Luther Quarter, which was partially financed by a bank loan. In addition, bonds in the amount of EUR 15,000 thousand were issued in the third quarter of 2025. The weighted average interest rate of the Group's interest-bearing liabilities as of 31 March 2025 was 8.84%.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| In thousands of euros | Q1 2026 | Q1 2025 |
| Revenue from sale of own real estate | 270 | 1,589 |
| Revenue from rendering of services | 120 | 117 |
| Total revenue | 390 | 1,706 |
| Cost of sales | -325 | -1,108 |
| Gross profit | 65 | 598 |
| Other income | 87 | 1 |
| Marketing and distribution expenses | -124 | -69 |
| Administrative expenses | -440 | -270 |
| Other expenses | -71 | -1 |
| Operating profit | -483 | 260 |
| Financial costs | -95 | -143 |
| Profit/ loss before tax | -578 | 117 |
| Income tax | 0 | -13 |
| Net profit/ loss for the period | -578 | 104 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| In thousands of euros | 31 March 2026 | 31 December 2025 |
| Cash and cash equivalents | 3,065 | 2,784 |
| Receivables and prepayments | 6,968 | 6,420 |
| Inventories | 78,786 | 74,127 |
| Total current assets | 88,819 | 83,331 |
| Receivables and prepayments | 18 | 18 |
| Investment property | 2,296 | 2,296 |
| Property, plant and equipment | 533 | 551 |
| Intangible assets | 36 | 41 |
| Total non-current assets | 2,882 | 2,905 |
| TOTAL ASSETS | 91,702 | 86,236 |
| Loans and borrowings | 4,165 | 4,180 |
| Payables and deferred income | 10,594 | 8,560 |
| Warranty provisions | 479 | 347 |
| Total current liabilities | 15,238 | 13,087 |
| Loans and borrowings | 40,200 | 36,283 |
| Payables and deferred income | 478 | 503 |
| Total non-current liabilities | 40,679 | 36,786 |
| TOTAL LIABILITIES | 55,917 | 49,873 |
| Share capital | 12,158 | 7,272 |
| Share premium | 16,399 | 3,835 |
| Statutory capital reserve | 2,011 | 2,011 |
| Other reserves | 28 | 28 |
| Retained earnings | 5,189 | 5,767 |
| TOTAL EQUITY | 35,785 | 36,363 |
| TOTAL LIABILITIES AND EQUITY | 91,702 | 86,236 |
Darja Bolshakova
CFO
Arco Vara AS
www.arcovara.com
