GROUP CEO’S REVIEW The fourth quarter of 2025 in the Estonian real estate market was overall stable, but fell short of the expectations set at the beginning of the year. The market was no longer in a downturn phase; however, a clear growth cycle had not yet begun either. Rather, it was a period of stabilization, during which both buyers and sellers were adapting to the new economic environment and waiting for clearer signals regarding interest rates and the overall improvement of economic conditions. The fo ...

Core Insights - The Estonian real estate market showed stable and moderately recovering activity in Q3 2025, with transaction numbers comparable to the previous quarter and a slight upward trend in average prices per square meter, particularly in Tallinn [1][2] - The market is influenced by high interest rates and buyer caution, but improved confidence and stabilized economic expectations suggest a balanced phase, with moderate recovery expected in H1 2026 if macroeconomic conditions remain stable [2] - Arco Vara's first public bond offering was a significant event, being oversubscribed more than twofold, marking the largest bond issue among Baltic real estate developers to date [3] Market Overview - The Estonian real estate market is adapting after recent cooling, with stable transaction activity and strong demand for high-quality residential spaces [1][2] - The market has reached a balance after periods of rapid growth and decline, with both prices and transaction volumes stabilizing [2] Company Developments - Arco Vara's bond issue aims to finance the Luther Quarter development, transforming a historic industrial area into a modern urban space [4] - The company envisions creating a "city within a city" in the Luther Quarter, integrating residential, commercial, and public spaces [5] - Ongoing developments include Rannakalda, Soodi 6, and Spordi, with significant sales activity and construction progress reported [6][7][8] Financial Performance - For the first nine months of 2025, Arco Vara reported sales revenue of EUR 5,624 thousand, an increase of EUR 1,537 thousand compared to the same period in 2024 [14] - The company achieved an operating profit of EUR 622 thousand and a net profit of EUR 214 thousand, a significant turnaround from losses in the previous year [14][19] - In Q3 2025, 25 apartments were sold, reflecting a notable increase in sales activity compared to Q3 2024 [15] Strategic Focus - Arco Vara is focusing on active sales efforts and the progress of development projects, with specific targets for the fourth quarter [11][12] - The company is strategically exiting the Bulgarian market to concentrate on Estonian projects, enhancing operational efficiency [10] - The approval of the Arcojärve detailed spatial plan is expected to lay the groundwork for further investments in inner-city developments [9] Key Performance Indicators - As of September 30, 2025, the Group's total assets more than doubled compared to the previous year, primarily due to new project acquisitions [16] - The Group's net debt increased to EUR 47,407 thousand, largely due to the acquisition of the Luther Quarter [17] - The weighted average interest rate on the Group's interest-bearing liabilities was 9.09% as of September 30, 2025 [17]