2024 Annual Report of Arco Vara
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GROUP CEO’S REVIEW
The year 2024 brought numerous challenges in the sector of real estate, requiring companies to be flexible, exercise strategic planning, and adapt to the changing market conditions. The real estate developer Arco Vara faced a complicated economic environment where low consumer confidence and high interest rates impacted the activity of the real estate market and the financial results of the company.
The greatest challenge of the first half of the year was selling completed apartments in Kodulahe and Kuldlehe developments, the market value of which is nearly 14 million euros. Even though a growth appeared in the number of transactions on the apartment market in the second half of the year, the overall interest in purchasing remained modest. In addition, the start of construction of the next stage of Kodulahe (Soodi 6) was postponed due to processing the construction permit, which in turn impacted the project schedule and future revenue.
The volatility of the economic environment and high borrowing costs placed pressure on corporate profitability. Despite all this, we managed to maintain a steady and clear path towards increasing future development volumes and to continue development in line with our strategy. We may have ended the year 2024 with a loss, but our focus remained on ensuring long-term sustainability and strategic management of investments.
Signs of stabilisation were seen in the second half of the year - the decrease of Euribor had a positive effect on the market and the transaction volume of apartments grew in Q4 of 2024 compared to both the same period of the previous year as well as the first half of 2024. An adjustment of pricing policies and occupancy rates were also observed in both the residential market and commercial real estate.
Arco Vara continued to seek new investments and develop existing projects. Our focus remained on developing sustainability and expanding the life cycle analysis to all new projects. Our promise "Build the future, create value" guides all of our decisions and activities.
In 2024, we focused on developing quality residential environments, maintaining a strong financial position, and flexible adjustment to market changes, in order to ensure the sustainable growth and competitiveness of the company. Our mission is creating modern, sustainable and desirable residential environments where the customer can create their dream home.
Our vision is to be the first choice for homebuyers. A 360-degree real estate journey combining development, construction, sales, and customer service, allows us to offer the best homebuying experience and homes with the best convenience of use.
The primary focus of Arco Vara is a satisfied customer - which will also remain the focus of our daily work in the future. Even though 2024 was the year of adaptation and finding balance, we remain confident that our strategic direction and knowledgeable management form a strong basis for future developments and sustainable growth.
Our main goals for 2025 are to complete the first stage of the Bulgarian development, sell the completed apartments in Kodulahe and Kuldlehe, and to start the construction at Soodi 6. We are also moving forward with the development of the Arcojärve project, hoping to obtain the construction permit as early as by the end of the year. In addition, we are looking for new projects to add to our portfolio in order to increase development volume and strengthen the position of the company on the real estate market.
KEY PERFORMANCE INDICATORS
The group’s revenue was 7,477 thousand euros, which is 2.5 times less than the revenue of 18,339 thousand euros in 2023.
In 2024, the Group’s operating profit (=EBIT) was 68 thousand euros and net loss 624 thousand euros. In 2023, the group made operating profit of 3,940 thousand euros and net profit of 3,550 thousand euros.
In 2024, 23 apartments were sold in projects developed by the group in Estonia. In 2023, 66 apartments, 3 commercial spaces in Estonia and 3 land plots in Latvia.
In 2024, the group’s debt burden (net loans) increased by 4,887 thousand euros up to the level of 13,495 thousand euros as of 31 December 2024. As of 31 December 2024, the weighted average annual interest rate of interest-bearing liabilities was 8.7%. This is an increase of 0.5 percentage points compared to 31 December 2023.
OPERATING REPORT
The revenue of the Group totaled 7,477 thousand euros in 2024 (in 2023: 18,339 thousand euros), including revenue from the sale of properties in the Group’s own development projects in the amount of 7,145 thousand euros (in 2023: 17,581 thousand euros).
Other sales revenue in 2024 mainly includes revenue from franchise fees of real estate agencies in Estonia, Latvia and Bulgaria. Franchise fees for 2024 were 273 thousand euros, franchise revenues for 2023 were 252 thousand euros.
In 2024, the pre-sale of the next stage of Kodulahe began: 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. 21 apartments were sold in the project in 2024. 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 start of the construction of the first stage is planned for 2025.
In the Pirita 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 venuw has been given a long-term full lease and generates rental income for the group from 2024.
After to the balance sheet, 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. 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 | 2024 | 2023 |
| Revenue from sale of own real estate | 7,145 | 17,581 |
| Revenue from rendering of services | 332 | 758 |
| Total revenue | 7,477 | 18,339 |
| Cost of sales | -5,707 | -12,740 |
| Gross profit | 1,770 | 5,599 |
| Other income | 7 | 107 |
| Marketing and distribution expenses | -551 | -387 |
| Administrative expenses | -1,127 | -1,387 |
| Other expenses | -31 | -20 |
| Gain on investment property | 0 | 28 |
| Operating profit | 68 | 3,940 |
| Financial costs | -640 | -390 |
| Profit/ loss before tax | -572 | 3,550 |
| Income tax | -52 | 0 |
| Net profit/ loss for the period | -624 | 3,550 |
| Total comprehensive profit/ loss for the period | -624 | 3,550 |
| Attributable to owners of the parent | -624 | 3,550 |
| Earnings per share (in euros) | ||
| - basic | -0.06 | 0.34 |
| - diluted | -0.06 | 0.34 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| In thousands of euros | 31 December 2024 | 31 December 2023 |
| Cash and cash equivalents | 1,720 | 1,472 |
| Receivables and prepayments | 5,690 | 5,798 |
| Inventories | 29,170 | 27,637 |
| Total current assets | 36,580 | 34,907 |
| Receivables and prepayments | 18 | 18 |
| Investment property | 2,296 | 20 |
| Property, plant and equipment | 622 | 221 |
| Intangible assets | 52 | 24 |
| Total non-current assets | 2,988 | 283 |
| TOTAL ASSETS | 39,568 | 35,190 |
| Loans and borrowings | 234 | 3,391 |
| Payables and deferred income | 4,487 | 4,013 |
| Warranty provisions | 127 | 80 |
| Total current liabilities | 4,848 | 7,484 |
| Loans and borrowings | 14,981 | 6,689 |
| Total non-current liabilities | 14,981 | 6,689 |
| TOTAL LIABILITIES | 19,829 | 14,173 |
| Share capital | 7,272 | 7,272 |
| Share premium | 3,835 | 3,835 |
| Statutory capital reserve | 2,011 | 2,011 |
| Other reserves | 27 | 56 |
| Retained earnings | 6,594 | 7,843 |
| Total equity attributable to owners of the parent | 19,739 | 21,017 |
| TOTAL EQUITY | 19,739 | 21,017 |
| TOTAL LIABILITIES AND EQUITY | 39,568 | 35,190 |
Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com
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