2020 Annual Report of Arco Vara

GROUP CEO’S REVIEW

At the beginning of 2020, due to the constraints of COVID-19, price fluctuations and rapid market adjustment were also expected in the real estate sector, but this did not take place for new developments. Arco Vara and our partners reacted quickly to limit the spread of the virus, which ensured the timely completion of the sites and the fulfilment of the set sales targets.

The improved terms of development loans can be considered an important development, which are important for the successful implementation of Estonian development projects also in 2021 and 2022. In Bulgaria, the main keyword is obtaining an usage permit for Iztok Parkside, where most of the final sales took place in the first quarter of 2021.

On the Estonian side of development activities, Arco Vara has achieved the reputation of a reliable developer, which is shown by the success of the Kodulahe and Kodukalda projects. Today, Kodulahe Phase 3 building has been sold out and approximately 70% of the Phase 4 and Phase 5 buildings have been pre-sold. There are 4 unsold apartments in the Tartu Kodukalda project, but the interest in the development is constant, which provides certainty for achieving final sales in the second quarter.

In addition to the finalised projects and the projects to be completed, we started designing the 6th stage of Kodulahe at the end of 2020, the public sale of which will commence 3 months earlier than had been planned - in the third quarter of 2021.

The Bulgarian development activity achieved the long-awaited authorisation for use of Iztok Parkside, which is expected to be sold out in the second quarter of 2021. At the moment, 66 out of the 67 apartments have been sold there in the development project.

The commercial property site Madrid BLVD had an occupancy rate of approximately 95% during 2020, which is a successful achievement for the team there, taking into account the situation of last year. Due to the multiple purposes of the building and the restrictions that favoured the building, the tenants were able to continue their business for most of the year, which ensured a lower-than-expected decrease in sales revenue.

Based on the results of 2020, and pointing out the 2.5-fold increase in the return on equity and an increase of the net profit margin of almost 2 times, we are on the track to increase development volumes in the next three years. This is also supported by the contracts concluded at the beginning of 2021 for the development of the registered immovables at Paldiski road 124b and Soodi street 6.