From 8 August, 2014 until 29 August, 2014 took place the offering of new shares of Arco Vara AS. In total 1 375 305 shares were subscribed for. Arco Vara AS has made a decision regarding the allocation of subscribed shares to the investors. All investors will receive the full amount of shares they subscribed for. The Management Board of Arco Vara AS will adopt a decision regarding the shares which were not subscribed for, i.e. 2 124 695 shares, after the settlement.

As a result of the subscription of new shares the share capital of Arco Vara AS will be increased by 962 713.5 EUR, i.e. the new share capital will be 4 281 908.4 EUR.

CEO’s comment about the subscription results: “The Company set out to raise up to 3.5 million EUR. Subscriptions equalled 39% of this total and the company attracted 1.375 million EUR. Investors may therefore ask, whether the subscription was a success or a failure?

This implies that Arco Vara’s shares on issue will be increased by 29%, from 4.7 million to 6.1 million. A mixture of retail and institutional investors participated, including those who were not previously shareholders of Arco Vara.

From the viewpoint of management the capitalization of the group has improved and for the first time since 2012 the group has free cash which can be invested into new projects. One may also say that it is the first time since the IPO investors dared to place their money into Arco Vara again. Key employees of Arco Vara’s Bulgarian and Estonian units participated in the share issue, contributing more than 20,000 EUR. The company thanks everyone for their trust and admits that more work is necessary to regain full investor confidence in the coming years. 

The share capital increase objectives that we set in the spring were to (i) implement the Paldiski road 70C development project in Tallinn and (ii) continue earning stable rent revenues in Sofia, Madrid Blvd building by extending the existing loan agreement until December 2017 and by reducing the outstanding loan on the building by 1.2 million EUR.

Management deems the realization of these objectives as very likely. As a condition precedent, we must continuously succeed in selling the apartments in Manastirski Stage II and undertake very dynamic management of cashflows. Construction works of Manastirski Stage II must be completed within 60 days at the latest and the sale of the apartments commences in Q4. The extension of the loan agreement with Piraeus bank in the Madrid Blvd project has already been signed, and the 1.2 million EUR must be paid by the end of November 2014. During the capital raising process management also received confirmation that there is interest from potential investors to participate in the Paldiski road 70C project even if Arco Vara itself would not be able to inject additional equity into the project (in addition to the existing landplot and construction rights) - whereas it should be immediately added that depending on the success of the Manastirski project the group will have sufficient capacity to inject equity into its new projects.

As a main obstacle to engage new investors into the group, we should point out their current fears towards general uncertainties resulting from the escalating Russia-Ukraine conflict. Evidently the group can help to overcome these concerns by demonstrating within the next one to two years its capability to make money with development activities in its markets, and distribute money between the broadened shareholder base consisting of 6.1 million shares.”

On 26 August, 2014, the Management Board of NASDAQ OMX Tallinn stock exchange decided to approve the application of Arco Vara AS and to list up to 3 500 000 additional shares in the Baltic Primary List under the following conditions:

·         the offering Arco Vara AS shares has been completed, the offering has been conducted according to the conditions described in the Issuer’s prospectus and the offering results are disclosed;

·         the offered shares have been transferred to the securities accounts of new investors in Estonian CSD;

·         the issued shares have been converted into main shares (ISIN: EE3100034653) in Estonian CSD;

·         after meeting the aforementioned conditions, Arco Vara AS has submitted the respective report to the Exchange.

Trading with Arco Vara AS additional shares will start on the next trading day after meeting the aforementioned conditions.

IMPORTANT DATES:

• On or about 04.09.2014 new shares will be transferred to the investors’ securities accounts
• On or about 17.09.2014 new shares will commence trading on the NASDAQ OMX Tallinn Stock Exchange

         Evelin Kanter
         Lawyer
         Arco Vara AS
         Tel: +372 614 4594
         evelin.kanter@arcovara.ee
         http://www.arcorealestate.com