Arco Vara's 2024: Facing Challenges and Looking Ahead
GROUP CEO’S REVIEW
In 2024, the real estate sector encountered a myriad of challenges, prompting firms to remain nimble and engage in strategic planning. The real estate developer Arco Vara navigated a complicated economic landscape characterized by muted consumer confidence and escalating interest rates, both of which adversely affected market activity and the company's financial outcomes.
One of the most pressing challenges during the initial half of the year was the sale of finished apartments in the Kodulahe and Kuldlehe projects, collectively valued at around 14 million euros. Despite a noticeable increase in apartment transactions during the latter half of the year, overall buyer interest stayed tepid. Additionally, the commencement of construction for the next phase of Kodulahe (Soodi 6) faced delays due to the construction permit process, subsequently affecting project timelines and anticipated revenue.
The fluctuating economic environment and elevated borrowing costs significantly pressured corporate profitability. Regardless of these difficulties, we maintained a steadfast commitment to expanding our future development volumes and progressing in alignment with our strategic goals. While we recorded a loss at the close of 2024, our priority remained long-term sustainability and the strategic management of our investments.
Towards the latter half of the year, we began to observe signs of stabilization. A decline in Euribor rates positively influenced the market, leading to a rise in apartment transactions during the fourth quarter compared to the same period in the prior year. Adjustments in pricing policies and occupancy rates for both residential and commercial real estate were also notable trends.
Arco Vara consistently pursued new investments and advancements in our current projects. Our emphasis remained on enhancing sustainability and broadening our life cycle analysis for all upcoming projects. Our guiding promise, "Build the future, create value," underpins all our strategic decisions and activities.
In 2024, we dedicated ourselves to crafting quality residential spaces while maintaining financial robustness and adapting flexibly to market fluctuations. Our objective is to develop modern, sustainable, and attractive living environments that empower our customers to realize their dream homes.
Our vision is to be the premier choice for homebuyers, offering a seamless real estate journey that encompasses development, construction, sales, and customer service. This integrated approach ensures we provide an unparalleled homebuying experience along with residences that offer the highest convenience.
At the core of Arco Vara's mission is customer satisfaction, which will continue to guide our efforts moving forward. Despite 2024 being a year of adaptation and recalibrating our focus, we are optimistic that our strategic direction and experienced management team will provide a solid foundation for future advancements and sustainable growth.
Looking ahead, our principal objectives for 2025 include completing the first phase of our Bulgarian development, selling the remaining completed apartments in Kodulahe and Kuldlehe, and initiating construction at Soodi 6. We are also advancing the Arcojärve project with plans to secure the construction permit by year-end. Moreover, we are actively scouting new projects to bolster our portfolio and elevate our market position in the real estate sector.
KEY PERFORMANCE INDICATORS
For 2024, Arco Vara reported a total revenue of 7,477 thousand euros, representing a sharp decline to 2.5 times less than the 2023 revenue of 18,339 thousand euros. The Group’s operating profit was recorded at 68 thousand euros, with a notable net loss of 624 thousand euros, contrasting sharply with the operating profit of 3,940 thousand euros and net profit of 3,550 thousand euros achieved in 2023.
Throughout 2024, we witnessed the sale of 23 apartments from our projects developed in Estonia. This performance paled in comparison to 2023 when 66 apartments, along with 3 commercial spaces in Estonia and 3 land plots in Latvia, were sold.
Our debt burden, represented by net loans, escalated by 4,887 thousand euros, resulting in a total of 13,495 thousand euros as of December 31. As of the same date, the average annual interest rate on interest-bearing liabilities rose to 8.7%, marking an increase of 0.5 percentage points compared to the end of 2023.
OPERATING REPORT
Revenue generation for Arco Vara totaled 7,477 thousand euros in 2024, a decrease from the previous year's figure of 18,339 thousand euros. The revenue from sales of properties within our own development projects accounted for 7,145 thousand euros of this total, significantly down from 17,581 thousand euros in 2023.
Additional sales revenue primarily stemmed from franchise fees collected from our real estate agencies operating across Estonia, Latvia, and Bulgaria, which amounted to 273 thousand euros in 2024 compared to 252 thousand euros in 2023.
In 2024, pre-sales activities commenced for the upcoming phase of Kodulahe, which will feature 62 apartments and 4 commercial spaces distributed across three buildings at Soodi 6. As of this report's publication, 8 apartments and 2 commercial premises have been presold, with completion scheduled for 2026.
In the most upscale segment of Kodulahe, known as Rannakalda, we have successfully completed the development of a pavilion, 4 service areas, and 108 sea-view apartments (spread over three separate buildings). In 2024, 21 apartments were sold, leaving 21 of the total 113 vacant at the time of the quarterly report publication.
Arco Vara's subsidiary, Arcojärve OÜ, made strides in 2021 by securing a land acquisition agreement adjacent to Lake Harku, planning to develop over 35,000 square meters dedicated to residential and commercial real estate. The first construction phase is slated for 2025.
The Pirita Kuldlehe project saw the successful completion of an exclusive cluster house comprising 5 spacious homes, with 3 out of 5 apartments available by the quarterly report date.
Additionally, the Botanica Lozen initiative anticipates the construction of 54 homes in three phases. The first 16 homes are in the early stages of construction and are set for completion in Q2 2025, with 9 of the 16 already pre-sold by the report's publication date.
Our subsidiary Kerberon OÜ has developed an automatic padel venue featuring six indoor courts, generating consistent rental income for the group starting in 2024. This venue was built through a collaboration with Arco Tarc OÜ.
Tabled under the balance sheet, the acquisition of a property with a building permit at Spordi 3a and 3b in Tallinn has been finalized, with plans to construct two residential buildings totaling 7,600 square meters, inclusive of underground parking. The pre-sales for these apartments are slated to commence in Q2 2025, with homeowners expected to receive their keys by the end of 2026. Arco Tarc OÜ will spearhead the construction of these buildings.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
The financial data showcases a marked contrast in profit compared to previous years:
Total Revenue (thousands of euros)
- 2024: 7,477
- 2023: 18,339
Operating Profit (thousands of euros)
- 2024: 68
- 2023: 3,940
Net Profit/Loss (thousands of euros)
- 2024: -624
- 2023: 3,550
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
In terms of financial positioning, significant figures include:
Total Assets (thousands of euros)
- 2024: 39,568
- 2023: 35,190
Total Liabilities (thousands of euros)
- 2024: 19,829
- 2023: 14,173
Our total equity attributable to parent owners stood at 19,739 thousand euros in 2024, reflecting a decrease from 21,017 thousand euros in 2023.
For inquiries or more information, feel free to contact:
Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
Website: www.arcovara.com
Frequently Asked Questions
What were the key challenges faced by Arco Vara in 2024?
Arco Vara faced challenges such as low consumer confidence and high interest rates which impacted sales and overall market activity.
How did Arco Vara perform financially in 2024?
The company reported revenue of 7,477 thousand euros and a net loss of 624 thousand euros.
What are Arco Vara's goals for 2025?
The primary goals include completing the Bulgarian development and initiating construction at Soodi 6.
What measures did Arco Vara take for sustainability?
The company is focused on sustainable development and expanding its life cycle analysis to all new projects.
How many apartments were sold by Arco Vara in 2024?
In 2024, Arco Vara sold 23 apartments in its projects developed in Estonia.
About The Author
Contact Dominic Sanders privately here. Or send an email with ATTN: Dominic Sanders as the subject to contact@investorshangout.com.
About Investors Hangout
Investors Hangout is a leading online stock forum for financial discussion and learning, offering a wide range of free tools and resources. It draws in traders of all levels, who exchange market knowledge, investigate trading tactics, and keep an eye on industry developments in real time. Featuring financial articles, stock message boards, quotes, charts, company profiles, and live news updates. Through cooperative learning and a wealth of informational resources, it helps users from novices creating their first portfolios to experts honing their techniques. Join Investors Hangout today: https://investorshangout.com/
The content of this article is based on factual, publicly available information and does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice, and the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. This article should not be considered advice to purchase, sell, or hold any securities or other investments. If any of the material provided here is inaccurate, please contact us for corrections.