According to Q Vara OÜ's bond issue terms' sub clause 13.3.2, Q Vara hereby
presents the consolidated unaudited financial results for the first quarter
2007.
1. Introduction
The real estate market in the Baltic countries is in an interesting phase. The
hyper growth in prices has stopped and the fierce demand for any kind of real
estate together with that. Customers have taken a step back and carefully
analyse the product before making the purchase decision. But it does not mean
that the demand has vanished - the demand for good quality products with correct
price is still very strong.
At the same time the developments on the financing side have shifted also
towards conservatism. The macroeconomic signs of over heating (high inflation,
exploding borrowing against real estate, large trade deficit, booming internal
consumption etc.) have made banks cautious about financing real estate. For
example the debt financing share of construction has decreased from around 80%
to 60-70%. At the same time financing new land plot purchases has decreased even
more (especially land plots without detail plan).
The financiers are now looking more carefully on developers' previous
experience; own financing capacity and project assumptions. Also the financing
structures include more pre-sales requirements and breaking the projects into
smaller stages. The lastly mentioned assumption has been a key measurement also
for Q Vara to make the projects bankable.
Several important decisions were made in the first quarter of 2007 about Q
Vara's projects that should reduce risks and align with the new market
situation. The brief insight of such changes is described in the “Projects'
overview” section.
2. Cash flows matter
Considering the fact that in 2007 four Q Vara Group's projects are in the sales
phase (Kirsiaed row houses, Kirsiaed residential plots, Pinki residential
project, Terminal 11 industrial properties) the 2007 is expected to bring the
highest sales revenues for Q Vara Group. The management expects the consolidated
revenue to reach 350 000 thousand EEK by the end of 2007. Together with strong
sales revenues the cash flow from the sale of real estate should also be
significant (total cash flows from operations is lower by the own financing
investments into the construction of new projects). As historically also the
first quarter in 2007 showed modest sales results and cash flows from sales and
the management of Q Vara expects significant improvement to that in the second
quarter. This expectation is supported also by the strong client interest
towards Q Vara Group's projects that are in the sales phase (see also „Projects'
overview”)
Q Vara Group's accounting system is based on international financial accounting
standards (IFRS) and therefore the property investments are stated in their fair
value. Fair value method generates profit when the value of real estate
increases (fair value increases as a result of rising market prices or as a
result of property development). So as a result of price stabilization profit
decreases considerably (in Q Vara this means that revaluation profit will be
derived just from the value increase from development and only from projects in
early development phase like Trophy, Jonathan and Sofia). This is exactly the
case of the first quarter results in 2007 and that will probably affect the
annual results of 2007. The profits remain also unaffected by the revenue
increase because as the profit is included in the properties' fair values it
has been stated in the profit & loss statements of the previous periods (hence
the current sales price equals the more-less the calculated cost of sales).
This profit accounting specialty does not affect cash flows because cash flows
are still equal to revenues minus land acquisition price and construction cost.
So cash flows is the most important indicator in analyzing Q Vara Group's
financial performance.
The management of Q Vara Group expects record cash flows from the sale of real
estate in 2007. The final Group's cash flows are lower by the own financing
investments into the new projects' construction.
3. Structure
In the first quarter 2007 the group restructuring transactions were officially
finished. Firstly OÜ Multi Metall Kinnisvara and Merona Group transactions were
recorded in Estonian Commercial Registry which means that the merger between Q
Vara and these two companies is completed.
Another change in the group that was started in 2006 but finalized in 2007 was
shifting the real estate maintenance service to Q Vara's 100% subsidiary OÜ Q
Haldus. By the end of the first quarter Q Haldus has already taken over from Q
Vara and the client contracts were being changed.
A new company in Q Vara Group is AS Maakri City. The company was established by
Q Vara OÜ's jointly controlled company Stansfield OÜ together with Mark Invest
OÜ (subsidiary of SRV) and Maakri KVF OÜ established. AS Maakri City was
established for developing jointly the land plots between Maakri, Kuke and
Lennuki streets in Tallinn. The share capital amount of the new company is EEK
420 000 and the shares are equally divided between the three shareholders. Each
shareholder owns 14 000 shares with a nominal value of EEK 10. Tõnis Vare (Q
Vara OÜ's management board member), Margus Mändmets (SRV's management board
member) and Urmas Kivisalu (Maakri KVF's management board member) were elected
as the management board members of AS Maakri City.
On March 6, 2007 the shareholders of Q Vara OÜ decided to reorganize Q Vara from
private limited company (osaühing) into public limited company (aktsiaselts).
The decision does not bring any changes in the current shareholders' share
proportions. The change also does not affect employees, management board members
nor supervisory board members.
The shareholders' meeting also decided to approve the 25% minority shareholder
buyout by Q Vara OÜ's subsidiary SIA Q Estate in SIA Quality Nami. The minority
shareholding is owned by Viktorija Zagrebilnaja. SIA Quality Nami is developing
an apartment building with 403 apartments in Riga on Maskavas street. Currently
SIA Q Estate owns 75% of SIA Quality Nami.
The third decision by the same shareholders' meeting was to approve the
establishment of OÜ Q Ehitus' subsidiary in Lithuania. The new company will
start to offer construction main contracting services in Lithuania. The company
will be named Q Statyba and Q Ehitus will own 100% of its shares.
4. Management and personnel
The first quarter saw also several changes in Q Vara Group's team. Altogether 34
new employees joined the Group of whom most (20) were employed by the Group's
Latvian construction company SIA Q Būve. The total number of employees who left
the group to find their next challenge was four.
As the team has grown considerably during the last 12 months the constant
training on teamwork and work efficiency continues. Also the alignment of our
activities and team members' individuality bring slight changes within the
group.
According to the decision Q Vara OÜ's Supervisory Board that was made on April
24, 2007 Tõnis Vare was withdrawn from Q Vara OÜ's management board. No new
management board member was elected and Q Vara OÜ's management board continues
with two members: Meelis Šokman and Andre Poopuu. The Supervisory Board's
decision is related to the deeper integration of Q Vara OÜ's and Q Ehitus OÜ's
activities as a result of which several development activities are shifted from
Q Vara OÜ over to Q Ehitus OÜ.
In the contest of “Best Personnel Project 2006” Q Vara Group's “Management
training through organizing Paide Triathlon” was selected as the winner among
small companies. The project combined organizing Estonia's leading triathlon
competition with Q Varas trainings of teamwork and management skills. All the
assignments starting from setting up the track to cleaning up after the race,
were carried out by Q Vara's employees and volunteers. According to Q Vara's
employees this has been the best management training but most of all
irreplaceable event for strengthening the team spirit and mutual trust. Q Vara
Group has already started to prepare also the 2007 event.
5. Risk management
Because of the changing economic environment Q Vara's management looked through
the previous forecasts and realigned the plans. The actions were targeted at two
main problems: market risk and financing risk. Market risk is a risk that there
is no demand for the developed project that can arise from oversupply, clients'
financing difficulties or product specification problems. Financing risk on the
other hand is a risk that the company is not able to raise financing for project
development. This risk can arise from the banks' credit policy changes towards
reducing overall credit amount, drop in developers' credit rating or lack of
funds for own financing.
To hedge these risks Q Vara's management decided to reduce the development
volume by slicing projects into stages and connecting the development pace to
sales pace. Developing projects in smaller stages also improves cash flow
because less own financing is needed for investments at once and also the cash
locked into inventories decreases. Considering slower sales pace than before the
cash flow argument is a strong incentive to divide the projects into stages. It
also increases financiers' willingness to finance development projects because
their risks at any point of time is lower than in case the whole project is in
development and their outstanding risk amount (loan amount) is connected to
sales volume.
Because the own financing share in development projects has increased Q Vara's
management has looked through also the own financing sources. To increase
available own financing the decision was made to sell the Pärtlepõllu property
in Viimsi parish (Q Vara signed a contract to purchase the property in 2006) and
to realize some of the industrial properties in Terminal 11 project as land
plots. Such sales transactions enable the Group to secure needed own financing
in development projects and also to cover the overhead costs.
The more specific details about measures in each project are described in the
Projects' Overview section.
6. Bonds
In January 2007 Q Vara paid annual interests on the bonds issued in the
beginning of 2007. The interest payment amounted 8 606 thousand EEK (550
thousand EUR). Q Vara issued bonds in January 2006 with total face value of 72
233 thousand EEK (5 000 thousand Euro) and annual yield of 11%. The bonds mature
on January 10, 2009.
7. Financial results
Q Vara's consolidated operating income in the first quarter of 2007 was 16 081
Th EEK; 1 028 thousand EUR (2006 I quarter: 27 969 thousand EEK; 1 788 thousand
EUR). Sales revenue from real estate for the same period was 14 507 thousand
EEK; 927 thousand EUR (2006 I quarter: 27 516 thousand EEK; 1 759 thousand EUR).
The consolidated net loss for the ended three months was 18 229 thousand EEK;
1 165 thousand EUR (2006 I quarter loss: 8 736 thousand EEK; 558 thousand EUR).
At the end of the first quarter 2007 Q Vara Group is still strongly capitalized:
equity forms 35,4% of total assets. In the end of the quarter the total asset
amount was 797 335 thousand EEK; 50 959 thousand EUR and total equity amount was
281 897 thousand EEK; 18 015 thousand EUR. At the end of the first quarter 2006
the total asset amount was 486 019 thousand EEK; 31 062 thousand EUR.
8. Overview of the projects
8.1. Kirsiaed triple houses
- Location: Viimsi parish, Estonia
- Segment: Residential, high
- Development: Row houses
- Period: 2006-2007
- Sellable space: 3 305 m2
Introduction: Kirsiaed (“Cherry tree”) is a residential development project, in
which a family friendly and enjoyable living environment is created through
combination of architecture, landscape and greenery. Position towards the sun
and privacy of the residents were considered as the main starting points inform
the very beginning. The main features of the units are brightness, practical and
considered interior planning and a magnificent view on the silhouette of
Tallinn. One may choose a unit with high quality finishing's in place or a unit
where one can make the designs by oneself.
By the end of February 2007 15 boxes with final inner decoration are finished,
the rest 15 are still being inner decorated. In springtime the greenery concept
is started to be put into practice.
By the end of February 2007 15 units with final interior decoration were
finished and the other 15 units remain with “grey” finishing and wait for the
client's choice. In spring the greenery concept is realized to finish the
project.
Development: By the end of February 2007 15 units with final interior decoration
were finished and the other 15 units remain with “grey” finishing and wait for
the client's choice. In April also the greening works were started.
Sales: By the end of the first quarter of 2007 already six units were sold. At
the end of the quarter the clients started to show even more interest in the
project and by the third week of April already eight new bookings have been
made. Q Vara's sales team continues preparing these deals and hopes to sign
notarial sales agreements during the next couple of weeks. The increased
interest among clients can be explained by finished buildings and full
environment concept. Also the contacts from the previous client events are
starting to bare fruit as a result of active sales.
The total positive cash flow from the sale of Kirsiaed during the next months
(including the interior work expenses that must be done to complete all the
units and the construction loan repayment) is about EEK 20.7 million (EUR 1.3
million);
8.2. Kirsiaed plots
- Location: Viimsi parish, Estonia
- Segment: Residential, high
- Development: Residential land plots
- Period: 2006-2007
- Sellable space: 23 219 m2
Introduction: Kirsiaia residential land plot project is one of the few plot
developments in Viimsi that has all utility, connections, asphalt road and
street-lighting. Partial greenery has been planted to the plots already today -
fir-trees, thorn bush hedges, rowan trees and low cherry trees. The plots are
situated on a hilly terrain, from with a nice view on the Tallinn-panorama.
Sales: By the end of the first quarter 2007 the number of completed sales
transactions was two and a couple of interested clients were standing by. But in
the second half of March the demand increased considerably and by the third week
of april all 16 properties were booked. Q Vara's sales department expects to
complete the sales transactions by the end of May 2007.
8.3. Taevasmaa
- Location: Harku parish, Estonia
- Segment: Residential, medium
- Development: Gallery- and row houses
- Period: 2007-2009
- Sellable space: 32 137 m2
Introduction: The name Taevasmaa (Skyland) name comes from two architecturally
very different parts of the project (row houses - sky (Taevas in Estonian) and
gallery houses - land (maa in Estonian), which as joined together compile an
interesting and aesthetically pleasing living environment. The residential area
is situated nearby Tabasalu and has already today the value in the surrounding
nature and privacy. Q Vara is developing there apartment houses and row houses
with low acquisition costs and low monthly expenses. In creating the living
areas, the attention is paid on HEALTH and on INTEGRATION, which means houses
with few apartments, surrounding sporting facilities, playgrounds, greeneries',
play parks and kindergarten.
Ergonomics and practicality are considered also as very important details
throughout the development (entrance-room closets, kitchen furniture etc).
Development: The construction and sale of Taevasmaa project will be split into
stages and the stages into smaller sets. The timeline of different stages and
sets is determined by the sales pace.
The first stage of Taevasmaa consists of 10 apartment houses, each with 10
apartments (altogether 100 apartments). The first stage total volume is 8 157
sqm (including basements and saunas) and the preliminary construction price is
16 520 EEK (1 056 EUR; excluding land price and utility line costs). The
construction of the first stage is divided into smaller sets that include 3-4
houses (see the picture). This allows to test the market for demand and also
make the project bankable in the current market situation (banks' risks are
smaller at any point of time). The launch of the first set is yet undetermined
and it depends on the issuance of construction permit and the final financing
decision.
The construction of the second set of houses is launched only after at least 50%
of the first set are pre-sold (notarial agreements signed and 15% of the final
price paid in). Similarly the third set construction is launched after 50% of
the second set plus 100 % of the first set are pre sold.
As of the utilities, the lines that connect to the public utility network are
constructed considering all project stages (Eestkünka I and Eestkünka III
properties on full scale) but the lines on the project land are fully built only
on the plots of the first stage.
The first works were started in the beginning of April 2007 when the earth works
were launched. Earlier months were used for various preparation activities
(designing, preparing technical plans, communicating with local government
booking resources etc.). The general construction works follow after
construction permit is issued and the financing agreement has been signed on
full scale.
Taevasmaa projects' first stage is financed by bank loan (70% of the cost) and
own financing (30% of the cost). The financier is most probably DnB Nord Pank
that makes its final decision in May. In the first quarter 2007 DnB Nord Pank
has already opened a loan limit of EEK 12.0 million (EUR 0.8 million) to finance
the launch of the construction of the utility networks.
The main part of the first set's own financing comes from other Q Vara's
projects. Still some positive cash flows is expected to be received from pre
sales but this occurs in the later stages of the first set.
Sales: The pre-sales is launched after the general construction of the houses
begins. The preparations (marketing materials, project website etc) for sales
launch are underway.
8.4. Terminal 11
- Location: Rae parish, Estonia
- Segment: Commercial, medium
- Development: Warehouses
- Period: 2007-2009
- Sellable space: 42 000 m2
Introduction: Project's name - Terminal 11 - comes from its positioning beside
the Tallinn traffic circle (11th highway). The warehouses are aimed for small
and medium-sized companies, to whom the optimal storage size, common location of
storage and office space, very comfortable working conditions to the employees
and efficient storage managing are crucial. The project's focus is also on
minimizing clients' monthly loan repayments and administration costs.
Development: The construction of Terminal 11, the industrial park near Tallinn,
was launched in March 2007 with earth works. On 8 land plots out of 22 Q Vara
develops warehouses that are divided into 5-6 sections and are sold to small and
medium sized enterprises. Similarly to Taevasmaa project also Terminal 11 is
divided into smaller stages.
The first stage includes the construction of utility lines on the whole project
property and the construction of two warehouses. One of the buildings lies on
one land plot and features 6 sections and another lies over 2 land plots and
features 12 sections. The construction of the two buildings is started at
different time. Firstly, together with the construction of the utility lines
starts the construction of the smaller building. At the same time the pre-sales
begins. After at least 50% of the smaller building is pre-sold (transaction is
deemed completed after notarial pre-sales contract is signed and 10-15% of the
final price is paid) the construction of the second building is launched.
The construction of one building takes about 6 months which means that the first
building should be finished by the end of 2007. Still the final sales revenues
are forecasted to be paid by the customers in 2008.
The construction of utilities and buildings will be financed with bank loan (70%
of the project's cost) and own financing (30% of the project's cost). SEB Eesti
Ühispank has already made a binding offer to finance the project and Sampo Pank
will give the offer in May. Currently Sampo Pank, who financed also the purchase
of the land plot, has opened a loan limit of EEK 12.0 million (EUR 0.8) to
finance the launch of the construction of utilities.
Sales: In order to support the own financing part of the warehouses (besides the
pre-sales) part of the project's property is sold as land plots with utility
connections. The estimated sales price per land plot sqm is EEK 800.0 (EUR 51.1;
not including the VAT). Because the actual cash flows from the sale of land
plots and the pre sales contracts becomes available in a few months the first
months' own financing is obtained from other Q Vara's projects.
As of the beginning of April 2007 the projects' website has been set up
(www.terminal11.ee). Also the print material has been prepared that in all
allows launching the sales campaign of the project in the second half of April.
Firstly the main attention is focused on the sale of properties to which the
warehouses add up starting from May 2007. Q Vara has also negotiated direct
sales support from the corporate banking departments of the largest banks in
Estonia. The first interested potential clients have already registered
themselves on a waiting list that shows strong demand for commercial spaces
targeted at SME's.
8.5. Pärnu mnt 113 / Rapla 1
- Location: Tallinn, Estonia
- Segment: Residential/commercial
- Development: -
- Period: -
- Capacity: -
Introduction: The project includes a property at Pärnu mnt, near downtown of
Tallinn. According to Tallinn City's general plan an apartment-house / office
building may developed on the property.
In third quarter of 2006 Q Vara's Board decided to sell the 650 m2 property,
because the realization enables to earn profit more than 400%. Also one of the
reasons for the sale is that instead of splitting the resources between many
small projects they can be drawn together into larger projects (Taevasmaa and
Terminal 11).
In January 2007 the sales-purchase contract was signed and the transaction was
made. The propery's sales price was EEK 22 000 thousand (EUR 1 406 thousand).
8.6. Maakri
- Location: Tallinn, Estonia
- Segment: Residential / commercial, high
- Development: high-rise buildings
- Period: -
- Capacity: -
Introduction: Through an associate (Stansfield OÜ) Q Vara has two properties in
the centre of Tallinn. According to Tallinn City's general plans the area is
going to be a district with high-rise buildings that accommodate residential as
well as commercial space.
Development: The negotiations between Stansfield, Mark Invest and Maakri KVF
over joint development of the area continued. In the first quarter a joint
company - AS Maakri City - was established where all three parties own equal
share. The shareholders agreement continues. Also the negotiations with other
property owners to join joint development or to sell their properties go
forward.
8.7. Pärtlepõllu
- Location: Viimsi parish, Estonia
- Segment: Residential, medium
- Development: -
- Period: -
- Capacity: -
Introduction: Q Vara signed a contract in 2006 to purchase the Pärtlepõllu land
plot in Viimsi parish. Part of the property will be developed into residential
land and part of it remains as a green area. As Q Vara has not finalized the
property's purchase transaction the land is not on Q Vara's balance sheet.
Development: In the first quarter the detail planning documents were filed and
the local government started to work on them. The detail plan is expected to be
approved during 2007.
Sales: In the end of the first quarter Q Vara's management decided to start
looking for potential buyers for the property. The reason for selling the land
is that the funds received from the sale can be used in other projects as own
financing. Also the development of another small project disperses the resources
across various projects that on one hand can result in lack of focus and on the
other hand increased overheads. Also selling the project releases additional
risk limit in banks that allows to successfully financing other projects.
By April 2007 several interested buyers approached Q Vara and started
negotiations to purchase the property.
8.8. Silukalni
- Location: Pinki village, Latvia
- Segment: Residential, medium
- Development: Double and row houses
- Period: 2005-2007
- Sellable space: 8 525 m2
Introduction: Silukalni residential area is located next to a pine forest which
together with its suburban location makes a perfect home for a family. Double-
and row houses includes 72 units.
Development: In the first quarter of 2007 the main contractor agreement was
terminated with SIA Pinki and Q Būve became the new main contractor. The problem
with SIA Pinki was the inability to meet the agree deadlines and finishing the
first stage was again postponed. Most important is that the new constructor has
been able to stabilize the project and is working on the realistic project
timetable and budget. In construction activities the main focus is on the first
stage houses that are already pre-sold and almost ready (approximately 80% of
the first houses is finished).
An important achievement was also agreeing with DnB Nord Banka to increase the
project's bank loan limit because compared to the preliminary budget the
construction has become more expensive. Releasing the additional loan limit is
strictly tied to handing over the first stage apartments and every apartment
that is handed over releases additional share of new loan. The first three
houses (six units) are handed over in May/June.
Sales: The sale of the second and third stage started in December 2006 and has
proved successful. By April 2006 six contracts has been signed and five are
expected to be signed in a few weeks.
8.9. 365
- Location: Jurmala, Latvia
- Segment: Residential, high
- Development: Apartment building
- Period: 2006-2008
- Sellable space: 2 730 m2
Introduction: “365” apartment building is situated in a prestigious Jurmala
beach town. It is a stylish apartment building designed by Latvian top
architectural company SIA Sīlis, Zābers & Klava. The building includes thirty
exclusive apartments, which net space ranges from 60 to160 m2.
Development: By March 2007 the earth and pile works were finished and BMGS
handed the construction site over to the general construction main contractor
SIA Ars Domina. The project is in on schedule and the already done construction
works' quality is very good.
The project's budget is 100% covered with bank financing and the bank releases
the limit according to the pre sales of the apartments.
Sales: The pre-sales started in November and since then five apartments with the
highest price have been booked.
The active marketing campaign of the projects was launched in March. It includes
direct marketing to private banking clients in larger banks and PR articles and
large advertisements in the largest real estate magazines. Also a special sales
office is prepared for the project in Old Riga, at Torna Street 4. The sales
office features a scale model of the project and other informative materials -
booklets, plans etc. Also a short film is prepared to introduce the project
which will be presented to sales office visitors.
8.10. Jonathan
- Location: Riga, Latvia
- Segment: Residential, medium
- Development: Apartment building
- Period: 2007-2010
- Sellable space: 30 575 m2
Introduction: Jonathan is an apartment building that is situated in Riga, ashore
of Daugava River, 15 minutes drive from Riga city centre. The project's main
attraction is a pond in the courtyard which means that the building is partly in
the water and the pond has a direct connecting canal with the river. Nothing is
impossible...
Development: In January 2007 the project's detail plan was approved by Riga
City. After that the approval process of the project's sketch drawings
continued. In April also the sketch drawings were approved and preparation of
technical plans continues. The technical project is carried out in two stages of
which the zero cycle plans should be ready by the end of 2007. After that the
construction of the foundation works can be launched and the preparation of the
whole buildings' technical plans can be carried out at the same time and will be
finished expectedly in April 2008.
In the end of the first quarter the project's team started also to analyze
weather it is possible to divide the project's construction into stages.
According to the preliminary estimations the zero cycle works can be splitted
into two stages and the rest of the construction into three stages. The
preliminary project's timetable foresees that the construction of the project
will be launched in the first half of 2008.
Sales: The presales of the project begin in the end of 2007. In order to achieve
maximal possible sales volume with existing areas, special attention is to be
paid to marketing activities and informative materials. A sale of apartments is
planned to start with wide advertising campaign in mass media in the second half
of 2007. Advertisements will be placed in the largest thematic real estate
magazines and other issues. Along with advertising in mass media, home page in
the form of flash presentation will be developed, too.
Similarly to 365 also a sales office in Old Riga, at Torna Street 4 will be
opened. Also here the sales office features a scale model of the project,
various informative materials and a film about the project's story. The short
film contains dynamic three-dimensional description of the development. A short
version of the film will be also be shown in Cinema Forums in the block of
advertisements before the show.
8.11. Trophy
- Location: Vilnius, Lithuania
- Segment: Residential, high
- Development: Apartment building
- Period: 2007-2008
- Sellable space: 2 340 m2
Introduction: The project is developed on UAB Q Vara's property that was
acquired in the end of 2006 - 1 800 m2 property, addressed in Vilnius, Elniu 20.
The price of the property was 3,64 million LVL and 75% was financed by bank
loan. The financer was AB SEB Vilniaus Banka.
The plan is to develop a 2-3 floor apartment building, with total volume of 2
300 m2. The property is located in a prestigious green area in Vilnius called
Zverynas, right next to the downtown of Vilnius. The apartments with high
quality finishing targeted at upper-middle-class customers are priced from 2 300
to 2 900 euros per square meter and the size of the apartments ranges from 55 to
120 m2.
Development: In the first quarter of 2007 UAB Q Vara continued the detail
planning process and passed a couple of important procedures like local
community's public discussion and the construction commission. The detail plan
will expectedly be finished by the end of the second quarter of 2007.
At the same time the designing of the apartment house resumed and by the
beginning of April the first sketch drawings were already completed (see the
illustration below).
Sales: The sales and active marketing activities of the project are scheduled to
start in October 2007.
8.12. Sofia
- Location: Sofia, Bulgaria
- Segment: Residential / Business, medium / high
- Development: -
- Period: -
- Sellable space -
Introduction: In 2006 Q Vara entered Bulgarian real estate market and acquired
60% of a company named OOD Delta Retail. The minority shareholder of the company
is a local real estate company OOD Delta Imoti Capital. The acquired company
owns an 11 000 m2 property in the centre of Sofia. Since the acquisition was not
formally documented by the end of 2006, with the negotiations over the
shareholders agreement still pending, the investment was recorded as a loan
granted in the end of 2006.
The purpose of the property allows to develop there high rise buildings with
apartments and office spaces in it. In total Q Vara invested 2,98 million euros
into the project acquisition.
Development: In the first quarter a contest for the best sketch design of the
project was launched. The concept materials were distributed to four architects.
The first work was presented in the beginning of April.
As the first project team members were also hired the project coordination is
from now on sharply focused and the development has started to pick up speed.
9. Q Vara's consolidated profit and loss statement 2006
-------------------------------------------------------------
01.01.2007- 01.01.2006-
31.03.2007 31.12.2006
Unaudited Audited
thousand EEK thousand EEK
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Operating revenues
Sales revenues 14 507 63 231
Change in RE investments' value 161 545
Other operating revenues 1 574 2 867
Total operating revenues 16 081 227 643
Operating expenses
Cost of construction -8 494 -63 789
Direct development costs -4 087 -8 950
Development overhead costs -8 102 -23 326
Marketing costs -1 897 -9 459
Maintenance expenses -1 894 -1 940
Other operating expenses -3 288 -6 929
Total operating expenses -27 762 114 393
Operating profit -11 681 113 250
Financial income and expenses -6 548 -3 046
Pre-tax profit -18 229 110 204
Deferred income tax -10 787
Real estate tax -59
Net profit (loss) -18 229 99 358
Mother company's shareholders' share -18 328 79 831
Minority share 99 19 527
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01.01.2007- 01.01.2006-
31.03.2007 31.12.2006
Unaudited Audited
thousand EUR thousand EUR
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Operating revenues
Sales revenues 927 4 041
Change in RE investments' value 10 325
Other operating revenues 101 183
Total operating revenues 1 028 14 549
Operating expenses
Cost of construction -543 -4 077
Direct development costs -261 -572
Development overhead costs -518 -1 491
Marketing costs -121 -605
Maintenance expenses -121 -124
Other operating expenses -210 -443
Total operating expenses -1 774 -7 311
Operating profit -747 7 238
Financial income and expenses -418 -195
Pre-tax profit -1 165 7 043
Deferred income tax -689
Real estate tax -4
Net profit (loss) -1 165 6 350
Mother company's shareholders' share -1 171 5 102
Minority share 6 1 248
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10. Q Vara's consolidated balance sheet 2006
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31.03.2007 31.12.2006
Unaudited Audited
thousand EEK thousand EEK
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Current assets
Cash and cash equivalents 1 626 1 116
Accounts receivable 12 522 4 174
Short-term loans 76 196 74 334
Other short-term receivables 63 430 48 645
Interest receivables 7 226 6 677
Prepayments 33 389 25 908
Real estate for sale 241 753 216 043
Total current assets 436 142 376 897
Non-current assets
Long-term loans 6 264 5 760
Associated companies 32 618 32 618
Real estate investments 309 826 338 250
Tangible and intangible assets 12 485 8 826
Goodwill 0 2 886
Total non-current assets 361 193 388 340
Total assets 797 335 765 237
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Liabilities and equity
Current liabilities
Short-term loans 188 900 290 169
Capital lease liabilities 7 488 1 149
Customer prepayments 877 5 577
Accounts payable 30 190 22 163
Personnel related liabilities 2 505 2 650
Interest liabilities 12 414 14 164
Tax liabilities 1 693 0
Total current liabilities 244 067 335 872
Non-current liabilities
Long-term loans 163 122 14 936
Other long-term payables 287 90
Issued bonds 76 863 76 863
Capital lease liabilities 4 849 5 468
Deferred income tax 26 268 27 040
Total non-current liabilities 271 389 124 397
Total liabilities 515 456 460 269
Equity
Mother company's shareholders' equity
Share capital 73 511 73 511
Reserves 7 361 7 361
Unrealized exchange rate differences -1 154 177
Retained earnings 154 017 175 231
Mother company's shareholders' equity 233 735 256 280
Minority share 48 114 48 688
Total equity 281 879 304 968
Total liabilities and equity 797 335 765 237
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31.03.2007 31.12.2006
Unaudited Audited
thousand EUR thousand EUR
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Assets
Current assets
Cash and cash equivalents 104 71
Accounts receivable 800 267
Short-term loans 4 870 4 751
Other current receivables 4 054 3 109
Interest receivables 462 427
Prepayments 2 134 1 657
Real estate for sale 15 451 13 808
Total current assets 27 875 24 090
Non-current assets
Long-term loans 400 368
Associated companies 2 085 2 085
Real estate investments 19 801 21 618
Tangible and intangible assets 798 564
Godwill 0 184
Total non-current assets 23 084 24 819
Total assets 50 959 48 909
Liabilities and equity
Current liabilities
Short-term loans 12 073 18 545
Capital lease liabilities 479 74
Customer prepayments 56 357
Accounts payable 1 929 1 416
Personnel related liabilities 160 169
Interest liabilities 793 905
Tax liabilities 108 0
Total current liabilities 15 599 21 467
Non-current liabilities
Long-term loans 10 425 955
Other long-term liabilities 18 6
Issued bonds 4 912 4 912
Capital lease liabilities 310 349
Deferred income tax liabilities 1 679 1 728
Total non-current liabilities 17 345 7 950
Total liabilities 32 944 29 417
Equity
Mother company's shareholders' equity
Share capital 4 698 4 698
Reserves 470 470
Unrealized exchage rate differences -74 13
Retained earnings 9 813 11 197
Mother company's shareholders' equity 14 983 16 378
Minority share 3 077 3 114
Total equity 18 015 19 492
Total liabilities and equity 50 959 49 909
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Additional information:
Meelis Šokman
Chairman of the management board
Q Vara OÜ
Phone: 668 1600
