INTERIM REPORT FOR THE SECOND QUARTER OF 2025 (UNAUDITED)
GROUP CEO'S REVIEW
The second quarter of 2025 marked a continuation of the cautious yet gradual recovery in the real estate market. Market stability, the slow decline in interest rates, and the downward trend of Euribor continue to provide a favorable backdrop for development activities and growing buyer interest. Throughout the quarter, Arco Vara remained focused on sales activities in Estonia while making several important strides in strengthening its development portfolio and implementing strategic adjustments.
One of the key milestones of the quarter was the acquisition of the Luther Quarter property. Located in the heart of Tallinn, this site represents Arco Vara's next flagship development project. The Luther Quarter has significant potential to become a high-quality, multifunctional urban environment where historical legacy meets modern architecture and sustainable living.
Our vision for the Luther development is to create a balanced and human-scale environment that encompasses residential units, workplaces, cafes, culture, and high-quality public spaces. A central green park is planned as an accessible public space, contributing to a comprehensive and livable neighborhood.
We do not aim to simply construct buildings; our goal is to build a "city within the city": a vibrant, 24/7 urban quarter where people can live, work, and spend their leisure time. Tallinn needs more complete urban environments, self-sustaining neighborhoods that also integrate naturally with the city's broader fabric.
The acquisition of the Luther site has doubled the company's asset base and strengthened equity while maintaining a balanced capital structure. Preparatory work is ongoing, with construction scheduled to begin in the second quarter of 2026.
In the Rannakalda development, five additional apartments were sold during the second quarter, indicating continued interest in new homes located in attractive areas near Tallinn's city center. By the end of the quarter, a total of 97 out of 113 apartments/commercial units in the project had been sold. The main objective remains the full realization of the remaining units by the end of 2025.
In the Soodi 6 project, the long-anticipated building permit was obtained in June. Five additional apartments were reserved during the quarter, and construction officially commenced on June 30, 2025. The project continues to appeal to young families, investors, and more discerning clients due to its strong location and well-designed layouts.
Construction also began on the Spordi development in June. Pre-sales launched successfully, with six apartments reserved during the quarter. Pre-sales will continue through the end of July, with demand meeting expectations. The Spordi project enhances Arco Vara's portfolio in the highly sought-after Kristiine residential district, an area with limited new developments, where all essential services, including schools, shops, public transportation, and leisure options, are within walking distance. The development incorporates modern and smart solutions to meet today's lifestyle needs.
The Arcojärve detailed plan is nearing its adoption phase, anticipated to occur in 2025. This project plays a key role in Arco Vara's long-term strategy, laying the groundwork for future urban developments.
In Bulgaria, the Botanica Lozen project has reached its final phase, with landscaping works completed during the quarter.
In the Merivälja Kuldlehe development, one additional apartment was reserved. Only two apartments remain available, both of which have active interest. The project's exclusive nature and limited availability continue to position it strongly within Tallinn's premium residential segment.
Key focus areas for Q3 include completion of sales for the remaining apartments in Kuldlehe, the sale of at least six additional units in the Rannakalda project, continued design and planning for the Luther development, and ongoing construction activities in both the Spordi and Soodi 6 projects.
In summary, the second quarter of 2025 was marked by the achievement of several important milestones for Arco Vara. The start of construction and receipt of building permits in multiple projects, alongside the strategic acquisition of the Luther Quarter, provide a solid foundation for the company's continued growth in the Estonian real estate market.
KEY PERFORMANCE INDICATORS
The Group's sales revenue for the first six months of 2025 was € 3,093 thousand, which is € 1,160 thousand more than the sales revenue for the first six months of 2024.
The operating profit (EBIT) for the first half of 2025 amounted to € 265,000, and the net loss was € 43,000. In the first half of 2024, the Group recorded an operating loss of € 310,000 and a net loss of € 687,000.
In Q2 2025, five apartments were sold in projects developed by the Group, bringing the total number of apartments sold in the first half of 2025 to nine. As of June 30, 2025, there were 17 completed apartments and one commercial unit in inventory. For comparison, in Q2 2024, three apartments were sold in Group-developed projects, and a total of seven apartments were sold during the first six months of 2024. As of June 30, 2024, there were 44 completed apartments and one commercial unit in inventory.
As of June 30, 2025, the Group's total assets had approximately doubled compared to June 30, 2024. The main reason for the increase in asset volume was the acquisition of new development projects, including the Luther Quarter and Spordi 3a/3b developments.
The Group's loan burden (net loans) stood at € 33,261 thousand as of the end of the first six months of 2025, which is € 19,043 thousand more compared to the end of the same period in the previous year. The main reason for the increase in loan burden was the acquisition of the Luther Quarter, which was partially financed with a bank loan. The weighted average interest rate of the Group's interest-bearing liabilities was 9.07% as of June 30, 2025.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| In thousands of euros | 6 months 2025 | 6 months 2024 | Q2 2025 | Q2 2024 |
| Revenue from sale of own real estate | 2,853 | 1,797 | 1,264 | 870 |
| Revenue from rendering of services | 240 | 136 | 123 | 74 |
| Total revenue | 3,093 | 1,933 | 1,387 | 943 |
| Cost of sales | -2,069 | -1,376 | -961 | -559 |
| Gross profit | 1,025 | 557 | 426 | 384 |
| Marketing and distribution expenses | -193 | -219 | -125 | -149 |
| Administrative expenses | -562 | -631 | -293 | -335 |
| Other expenses | -4 | -16 | -4 | -2 |
| Operating profit | 265 | -310 | 5 | -101 |
| Financial costs | -295 | -377 | -152 | -236 |
| Profit/ loss before tax | -30 | -687 | -147 | -338 |
| Income tax | -13 | 0 | 0 | 0 |
| Net profit/ loss for the period | -43 | -687 | -146 | -338 |
Total comprehensive profit/ loss for the period | -43 | -687 | -146 | -338 |
| Attributable to owners of the parent | -43 | -687 | -146 | -338 |
| Earnings per share (in euros) | ||||
| - basic | 0.00 | -0.07 | -0.01 | -0.03 |
| - diluted | 0.00 | -0.07 | -0.01 | -0.03 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| In thousands of euros | June 30 2025 | December 31 2024 |
| Cash and cash equivalents | 1,388 | 1,720 |
| Receivables and prepayments | 5,775 | 5,690 |
| Inventories | 68,930 | 29,170 |
| Total current assets | 76,093 | 36,580 |
| Receivables and prepayments | 18 | 18 |
| Investment property | 2,296 | 2,296 |
| Property, plant and equipment | 587 | 622 |
| Intangible assets | 52 | 52 |
| Total non-current assets | 2,953 | 2,988 |
| TOTAL ASSETS | 79,046 | 39,568 |
| Loans and borrowings | 235 | 234 |
| Payables and deferred income | 6,910 | 4,487 |
| Warranty provisions | 341 | 127 |
| Total current liabilities | 7,486 | 4,848 |
| Loans and borrowings | 34,414 | 14,981 |
| Total non-current liabilities | 34,414 | 14,981 |
| TOTAL LIABILITIES | 41,900 | 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 | 6,551 | 6,594 |
| Total equity attributable to owners of the parent | 37,146 | 19,739 |
| TOTAL EQUITY | 37,146 | 19,739 |
| TOTAL LIABILITIES AND EQUITY | 79,046 | 39,568 |
Darja Bolshakova
CFO
Arco Vara AS
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