Arco Vara — Capital/Financing Update 2025

May 12, 2025

Arco Vara Acquires Luther Quarter Properties

Arco Vara Acquires Luther Quarter Properties

Arco Vara AS subsidiaries Arco L Factory OÜ, Arco L Torn OÜ, Arco L Torn II OÜ,
and Grupi Halduse OÜ have acquired full ownership of the Luther Quarter. The
quarter consists of 15 properties and is located in central Tallinn, between
Pärnu Road, Tatari, Vana-Lõuna, and Vineeri streets. A detailed plan is in place
for the area, allowing for a gross building volume of 95,000 m², including
18,500 m² of commercial space and 33,000 m² of net residential area. Most of the
volume indicated in the plan is already covered by valid building permits.

The acquisition price of the Luther Quarter is EUR35 million. The total estimated
investment for the project is EUR205 million.

Over the next eight years, Arco Vara will develop the former industrial area
into a modern mixed-use urban quarter with commercial space, residential
properties, and public areas. The planned contractor for the construction works
is Arco Tarc OÜ. Construction is scheduled to begin in 2026, and the project
will be carried out in phases. The presale of the first phase, which includes
the development of four buildings, is also planned for 2026.

As a result of the financing structure of the deal, the purchase price will be
paid to the sellers of the quarter in Arco Vara AS shares, cash, and through the
modified assumption of loan obligations with AS LHV Pank by Arco Vara.

To finance the development of the Luther Quarter, an additional EUR17.5 million in
investment is required. Therefore, Arco Vara AS has decided to carry out a share
capital increase through a directed share issue. The issue is directed at Alarmo
Kapital OÜ and, as new investors, the previous owners of the Luther Quarter
properties - Luther Factory OÜ and Luther Factory Holding OÜ.

The planned directed share issue involves issuing a total of 6,980,000 new
shares at an issue price of EUR2.50 per share, of which EUR0.70 is nominal value and
EUR1.80 is share premium.

The share price of EUR2.50 was mutually agreed upon, taking into account the
financial interests of both existing and new Arco Vara shareholders, the average
market price before the deal, the synergy created by the transaction, and the
added potential. Arco Vara's balance sheet will maintain approximately the pre-
transaction equity-to-debt ratio of 46/54.

As part of the project's financing structure, Arco Vara AS entered into a loan
agreement with majority shareholder Alarmo Kapital OÜ at an annual interest rate
of 6%. Under the agreement, Alarmo Kapital OÜ will provide Arco Vara AS with a
loan of EUR12 million. A share subscription agreement was also signed, under which
Alarmo Kapital OÜ will subscribe to 2,100,000 Arco Vara AS shares for a total of
EUR5.25 million. Following the planned share capital increase, expected to take
effect by the end of June 2025, Alarmo Kapital OÜ will hold at least 8,780,000
Arco Vara AS shares, while new shareholders Luther Factory OÜ and Luther Factory
Holding OÜ will jointly hold 4,880,000 shares.

Chairman of the Supervisory Board of Arco Vara AS and representative of Alarmo
Kapital OÜ, Tarmo Sild, stated: "With this transaction, the asset volume of Arco
Vara doubles, but the equity-to-debt ratio remains unchanged. Alarmo Kapital
intends to maintain its majority stake in Arco Vara and will inject over EUR5
million in equity into the company. Arco Vara's potential will at least triple,
as the post-transaction development volume backed by existing building permits
alone exceeds 70,000 square meters. We are investing based on the belief that
Tallinn is a growing city. Arco Vara's team is fast-developing, capable, and led
by strong management."

Darja Bolshakova
Chief Financial Officer
Arco Vara AS
Phone number: +372 614 4630
[email protected]