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 Pãrnu 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 €35 million. The total estimated investment for the project is €205 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 €17.5 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 €2.50 per share, of which €0.70 is nominal value and €1.80 is share premium.

The share price of €2.50 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 €12 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 €5.25 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 €5 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
darja.bolshakova@arcovara.com