Creating homes in a
smart way

...directly tapping the market’s pulse

2009



On 16.01.2009 the subsidiary of Arco Vara AS - Arco Investeeringute AS (participating interest of Arco Vara AS – 100%) established a subsidiary Arco Facility Management OOD in Bulgaria, which will be offering comprehensive property management services to the local market. Arco Vara has been rendering real property brokerage services on the Bulgarian market since 2006. Property development business was added to the above in 2007 with the launch of two residential development projects BLVD Residence and L!VD Apartments. The BLVD Residence project will be completed this autumn. The expansion of the property management services to the Bulgarian market was triggered by the need of the existing clientele for comprehensive property management services where customers are given the possibility to resolve any issues pertaining to the management of a property via one single entity. In Bulgaria this type of services is currently still underdeveloped.
The shareholders of Arco Facility Management OOD are Arco Invest EOOD – 80% (participating interest of Arco Investeeringute AS – 100%), Oliver Makko – 12%  and Emil Metchikian – 8%.
“The experience accumulated in Estonia allows us to expand our property management services to markets where this service is still at the development stage. The business of full-range property management services is stable even on a declining market, seeing that it is providing customers added value and possibilities for saving expenses,” says Oliver Makko, the head of Arco Facility Management commenting on the expansion.
 
Information about development projects of Arco Vara: www.arcorealestate.com/development .
 
Arco Vara AS


Arco Vara group sold its 100% holding in Romanian brokerage subsidiary called S.C.L-Base Project S.R.L (previously called Arco Real Estate Consulting S.R.L). The transaction is a part of restructuring activities of Arco Vara group's service division.

The transaction does not have significant material economical effect on the activities of Arco Vara AS and does not qualify as a transfer of significant shareholding nor a related party transaction within the meaning of “Requirements for Issuers” of the NASDAQ OMX Tallinn Stock Exchange Rules. The members of the supervisory board and management board of Arco Vara AS do not have any personal interests in the incorporation of the company.

Arco Vara is one of the leading real estate developer in the Baltic's, undergoing a SEE expansion with presence established already in Ukraine and Bulgaria. Core business is real estate development supported by brokerage network and construction arm. The company has offices in 18 cities and employs less than 400 people. According to 2007 audited consolidated results net sales was 727 mln kroons (46 mln euros), net profit before minorities 235 mln kroons (15 mln euros) and assets 3 564 mln kroons (228 mln euros). Arco Vara is listed on Tallinn Stock Exchange.

1 EUR=15.6466 EEK

Heigo Metsoja
CFO / Member of the Management Board
+372 6144 654
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.arcorealestate.com


 


Hereby Arco Vara AS announces that the release of the 12 month unaudited report of 2008 is delayed. Due to low liquidity of property market the annual valuation process of Arco's properties is more complicated. It has delayed group reporting by two weeks. Arco Vara presents its 12 month and Q4 results latest by 13th March 2009.

Arco Vara is one of the leading real estate developer in the Baltic's, undergoing a SEE expansion with presence established already in Ukraine and Bulgaria. Core business is real estate development supported by brokerage network, construction and property management arm. The company has offices in 18 cities and employs less than 400 people. According to 2007 audited consolidated results net sales was 727 mln kroons (46 mln euros), net profit before minorities 235 mln kroons (15 mln euros) and assets 3 564 mln kroons (228 mln euros). Arco Vara is listed on Tallinn Stock Exchange.

1 EUR=15,6466 EEK

Heigo Metsoja
CFO / Member of the Management Board
+372 6144 654
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.arcorealestate.com


Arco Vara financial results for 2008 are considerably effected by property fair value decreases resulted by steep decline in macroeconomic outlook in the
fourth quarter. In addition, Arco group wrote-off goodwill and receivables. Receivables included certain loans granted to joint-ventures where asset values
have dropped and our claim against AS Ühendatud Kapital. Considering the claim, the parties are negotiating over a payment schedule and additional collateral.

Total fair value adjustments for the year 2008 were 1 164 mln kroons (74 mln euros):

- 1 033 mln kroons (66 mln euros) for properties,
- 9 mln kroons (0.5 mln euros) for Goodwill,
- 122 mln kroons (8 mln euros) for receivables.

Majority of our properties are valued by Colliers International. In some of the cases the Group has used its own  more conservative approach.

According to our initial unaudited consolidated financial results for 2008 Arco had:

- 661 mln kroons (42 mln euros) of net sales
- 213 mln kroons (14 mln euros) of cash and cash equivalents incl. short-term bond investments
- 784 mln kroons (50 mln euros) of inventory
- 1 304 mln kroons (83 mln euros) of total current assets
- 1 946 mln kroons (124 mln euros) of total assets
- 684 mln kroons (44 mln euros) of equity
- 351 mln kroons (22 mln euros) of short-term interest-bearing liabilities
- 699 mln kroons (45 mln euros) of long-term interest-bearing liabilities

Arco Vara presents its 12 month and Q4 report latest by 13th March 2009.

Arco Vara management considers unfortunate that Tallinn Stock Exchange made a statement on 03.03.2009 on issuer's  financial situation without having financial information in their disposal. Arco's management argues that fair value decreases do not mean actual cash flow or effect daily operations. The recorded decline in asset values already takes into account the depressive market environment maintaining enough equity to continue business at much cheaper price levels. Management has been able to cut fixed costs by 50 mln kroons (3.2 mln euros). During the year the number of personnel has decreased by more than 300 people, whereas from September 2008 to March 2009 management has decreased the number of personnel by over 200 people. Arco has been able to
refinance much of its liabilities and expect the decrease in interest rates to give extra 15 mln kroons (1 mln euros) of annual savings. In order to release capital and decreasing liabilities further Arco will finish the current phases in the projects (Kolde and Merivälja in Tallinn, Madrid and Manastirski in Sofia, Bišumuiža-1 and Mazais Baltezers-3 in Riga) and considers of selling cash flow projects and some of the land bank.

Arco Vara is one of the leading real estate developer in the Baltic's, operating also in Ukraine and Bulgaria. Core business is real estate development supported by brokerage network, construction arm and property management. The company has offices in 18 cities and employs less than 350 people. According to 2007 results net sales was 727 mln kroons (46 mln euros), net profit before minorities 235 mln kroons (15 mln euros) and assets 3 564 mln kroons (228 mln euros). Arco Vara is listed on Tallinn Stock Exchange.

1 EUR=15,6466 EEK

Arco Vara AS

 


Arco Ehitus (100 % subsidiary Of Arco Vara) concluded a sale contract under the law of obligations to obtain office premices of Odra str. 16/Jakobi str. 29 in Tallinn on deferred terms.
Present owner of the business premises is a company OÜ Euro Shipping belonging to the Chairman of Supervisory board of Arco Vara. Arco Ehitus has been the key tenant at the above mentioned address for the last five years and has paid rent to OÜ Euro Shipping. There are other tenants in the building. The price of the transaction is 10.2 MEEK (0.65 MEUR) of which a large part will be paid at the end of 2011.
An independent valuator - Pindi Kinnisvara - estimated the market value of the asset as 10.7 MEEK (0.68 MEUR).

Arco Vara is one of the leading real estate developer in the Baltic's, operating also in Ukraine and Bulgaria. Core business is real estate development supported by brokerage network, construction arm and property management. The company has offices in 18 cities and employs 240 people. Arco Vara is listed on Tallinn Stock Exchange.

1 EUR=15.6466 EEK

Arco Vara AS


Whole stock news and interim report you can read here

Comments by the CEO

Arco Vara has sold in its project 13 % more apartments and plots as in year 2007. Our clients have purchased or booked 128 apartments and plots in twelve months - 15 more than the previous year. In the fourth quarter substantial correction in the margins and sales periods of the business resulted in additional write downs of all assets in accounting and in continuing business at a much lower price level.

A significant shift in the market took place in October when the interbank lending market froze, whereas the negative long term effect of the situation on liquidity, outlook and price expectations of property
market in the Group's home markets became obvious by the end of the year. Considering the situation the Group initiated a fixed cost reduction programme in value of at least 50 million kroons (3.2 million euros). As at the end of March 2009 the Group employed about 250 people. Top management salaries have also been cut by 10% after the balance sheet date.

Due the changes in real estate markets has Arco Vara restructured service division: the offices in Lithuania and Romania are closed, also some of the offices in smaller locations have been closed or franchised. The Group is no longer subsidising the brokerage offices in Ukraine and Bulgaria. The number of employees in service division has decreased to 107 by March 2009. After the balance sheet date it can be said that the service division does not yet break-even but there has been a substantial decrease in losses. The division concentrates its activities foremost on the Estonian, Latvian and Bulgarian markets.

Development division's performance indicators (planning, construction, vacancies and apartment sales) for the twelve months were positive. Highlights of the period included: adoption of zonings in projects Tivoli, Laeva 2 and MB-2, exiting from the Simferopol project and the apartment sales block deal in Sofia. Although 128 apartments and land plots were sold or booked, the majority of
revenue and gross profit is recorded at the end of 2009 and in spring 2010, after completion of the projects Madrid, Merivalja, Kolde and BM-1. It is essential to complete the ongoing projects within the year 2009 (Madrid in Sofia, Merivälja and Kolde in Tallinn, Bišumuiža-1 and Mazais Baltezers-3 in Riga) to enable us to sell the already booked product and to decrease the leverage. By the beginning of March 2009 an additional more than 20 apartments have already been sold, including 13 in Kolde project in Tallinn.

The turnover of 12 months of construction divison is increased 2.3 % (435.3 mln EEK, 27.8 mln EUR). It is a growing challenge for the construction division to turn a profit and to be able to win environmental engineering tenders in both Estonia and Latvia. Many contracts have been signed in the industry as a whole, however, the state financing is pending. Internal sales have almost vanished and future pipeline consists mainly of external orders. After the balance sheet date the number of employees has been decreased substantially due to completion of a major project in Latvia.

As at the end of the year the Group has liquid assets in value of 213.0 million kroons (13.6 million euros). Interest-bearing liabilities amount to 1,051.0 million kroons (67.2 million euros) of which 351.5 million kroons (22.5 euros) are short-term. To decrease liquidity and refinancing risks the Group has to sell some of the land bank and cash flow generating properties. The goal for 2009 is to decrease the net debt position by 300 million kroons (19.2 million euros). The refinancing risk in 2009 is mainly related to Latvian SEB and Sampo Bank in Estonia.