GROUP CEO’S REVIEW
Kert Keskpaik, CEO and Member of the Management Board of Arco Vara AS:
“In the third quarter of 2026, Arco Vara AS continued its operations in the real estate development sector. The objectives for the quarter were to sell apartments and commercial premises held in inventory and to continue pre-sales in the Spordi and Iili developments. Design work and a review of the business plan are currently underway at Luther Quarter.
The progress of each development project is summarised below:
- Iili development: Pre-sales at Kodulahe are progressing at a good pace. During the third quarter, five contracts under the Law of Obligations were signed. As of the publication date of this report, 42 apartments and four commercial premises had been pre-sold. Construction of Iili is progressing according to plan, with the signing of real rights contracts and the handover of apartments to customers scheduled to begin in November 2026.
- Spordi development: Sales could be progressing faster. As of the publication date of this report, 29 of the 56 apartments had been sold. During the third quarter, four contracts under the Law of Obligations were signed. The signing of real rights contracts and the handover of apartments to customers are scheduled for December 2026.
- Kuldlehe development: There were no changes during the quarter, and the final apartment remains unsold.
- Rannakalda development: During the quarter, two apartments and one commercial unit were sold in the Rannakalda development. After the reporting date, the final apartment was also sold, completing the sale of the entire Rannakalda development.
- Luther Quarter: Active design work and a review of the business plan are underway. The existing business plan did not meet the expectations of the company’s Supervisory Board, and the objective is to develop a business plan that meets the Supervisory Board’s return on equity expectations.
- Arcojärve: The detailed spatial plan approval process is in its final stages, but the plan has not yet been formally adopted. Based on the best information currently available, the detailed spatial plan could be approved in the fourth quarter of 2026.
- Botanica Lozen development in Bulgaria: During the third quarter, the company signed a preliminary agreement for the sale of a 75% ownership interest. The process is currently progressing according to plan.
Arco Vara’s loss in the third quarter is attributable to two development projects being in the construction phase. Revenue from pre-sales will be recognised following the conclusion of real rights contracts in the fourth quarter of 2026. Accordingly, we forecast an increase in revenue and profit in the fourth quarter.
Following the end of the third quarter, but before the publication of this report, changes were made to the composition of Arco Vara AS’s Supervisory Board, and the company’s Chief Executive Officer was also replaced. The aim of these changes is to strengthen shareholders’ oversight of the company’s management at a time when the Luther Quarter business plan did not meet the Supervisory Board’s return on equity expectations. Work is currently underway to determine what changes are required to the Luther Quarter business plan to ensure that it meets shareholders’ expectations. The next steps for Luther Quarter will become clearer over the coming quarters.
Arco Vara AS plans to introduce a change in its corporate culture, with a stronger focus on results, a winning mentality and a capitalist mindset. This means that future development projects will be undertaken only if the expected return on equity meets the expectations of the company’s shareholders.
I can confirm that the development projects currently under construction will be completed and handed over to our customers.”
KEY PERFORMANCE INDICATORS
The Group’s revenue for the first nine months of 2026 amounted to EUR 5,316 thousand, representing a decrease of EUR 308 thousand compared with the first nine months of 2025.
For the first nine months of 2026, the Group reported an operating loss (EBIT) of EUR 1,441 thousand and a net loss of EUR 1,533 thousand. In the first nine months of 2025, the Group generated an operating profit of EUR 622 thousand and a net profit of EUR 214 thousand.
During the third quarter of 2026, the Group sold 12 apartments in its development projects, of which 9 were sold under preliminary sale and purchase agreements and 3 under real right contracts. By comparison, in the third quarter of 2025, the Group sold 23 apartments, of which 17 were sold under a preliminary sale and purchase agreement and 6 under real right contracts.
As of 30 September 2026, the Group had 53 apartments available for sale across its development projects. As of 30 September 2025, the Group had 14 completed apartments and 1 commercial unit in inventory.
As of the end of the nine months of 2026, the Group’s net debt amounted to EUR 47,139 thousand, an increase of EUR 12,954 thousand compared with the end of the corresponding period of the previous year. The increase in net debt was primarily attributable to the utilisation of development loans to finance the construction of the Group’s ongoing real estate development projects. As of 30 September 2026, the weighted average interest rate on the Group’s interest-bearing liabilities was 8.83%.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| In thousands of euros | 9M 2026 | 9M 2025 | Q3 2026 | Q3 2025 |
| Revenue from sale of own real estate | 4,924 | 5,260 | 860 | 2,407 |
| Revenue from rendering of services | 393 | 365 | 137 | 124 |
| Total revenue | 5,316 | 5,624 | 997 | 2,531 |
| Cost of sales | -4,784 | -3,953 | -745 | -1,884 |
| Gross profit | 532 | 1,672 | 252 | 647 |
| Other income | 207 | 2 | 117 | 2 |
| Marketing and distribution expenses | -287 | -328 | -68 | -135 |
| Administrative expenses | -1,573 | -718 | -538 | -156 |
| Other expenses | -321 | -5 | 0 | -1 |
| Operating profit | -1,441 | 622 | -237 | 357 |
| Finance income and costs | 124 | -28 | -78 | -1 |
| Interest income and costs | -216 | -368 | -65 | -100 |
| Profit/ loss before tax | -1,533 | 226 | -380 | 256 |
| Income tax | 0 | -13 | 0 | 0 |
| Net profit/ loss for the period | -1,533 | 214 | -380 | 256 |
| attributable to owners of the parent | -1,508 | 214 | -355 | 256 |
| attributable to non-controlling interests | -25 | 0 | -25 | 0 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| In thousands of euros | 30 September 2026 | 31 December 2025 |
| Cash and cash equivalents | 2,993 | 2,784 |
| Receivables and prepayments | 2,638 | 6,420 |
| Inventories | 88,267 | 74,127 |
| Total current assets | 93,898 | 83,331 |
| Receivables and prepayments | 18 | 18 |
| Investment property | 20 | 2,296 |
| Property, plant and equipment | 48 | 551 |
| Intangible assets | 26 | 41 |
| Total non-current assets | 111 | 2,905 |
| TOTAL ASSETS | 94,010 | 86,236 |
| Loans and borrowings | 4,015 | 4,180 |
| Payables and deferred income | 6,201 | 8,560 |
| Warranty provisions | 272 | 347 |
| Total current liabilities | 10,487 | 13,087 |
| Loans and borrowings | 46,118 | 36,283 |
| Payables and deferred income | 375 | 503 |
| Total non-current liabilities | 46,493 | 36,786 |
| TOTAL LIABILITIES | 56,980 | 49,873 |
| Share capital | 12,158 | 12,158 |
| Share premium | 16,399 | 16,399 |
| Statutory capital reserve | 2,011 | 2,011 |
| Other reserves | 51 | 28 |
| Retained earnings | 5,767 | 6,593 |
| Total Comprehensive Income for the Reporting Period | -1,533 | -826 |
| Total equity attributable to owners of the parent | 34,853 | 36,363 |
| Non-controlling interest | 2,177 | 0 |
| TOTAL EQUITY | 37,029 | 36,363 |
| TOTAL LIABILITIES AND EQUITY | 94,010 | 86,236 |
Darja Bolshakova
CFO
Arco Vara AS
www.arcovara.com
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