ARCO VARA AS - NASDAQ OMX Baltic

• potential liabilities relating to the acquired land, properties or entities owning properties for
which the Group or the Joint Ventures may have limited or no recourse.
Although many of these risks are beyond the Group’s control, any negative change in one or more of
the factors listed above could adversely affect the Group’s business, results of operations and financial
condition.
Ability to acquire appropriate real estate on commercially acceptable terms
The Group’s ability to continue to develop projects is heavily dependent on identifying and acquiring
title or long-term leases on commercially attracting conditions to sites that are suitable for its projects.
The property markets in the Baltic States and also in Ukraine, Bulgaria and Romania are highly
competitive, particularly in and around the capital cities. Intense competition tends to put pressure on
real estate prices and therefore the cost of high-quality sites may increase. To date, the Group has
relied on a team of experienced real estate specialists to identify and secure sites. However, if the
Group fails to identify or secure sites on a timely basis for any reason, including competition from
third parties seeking similar sites, the Group’s anticipated growth may be adversely affected.
Consequently, there can be no assurance that the Group will successfully identify, lease and/or
purchase suitable properties on acceptable terms, and a failure to do so could have a material adverse
effect on the Group’s business, results of operations and financial condition.
The Company’s subsidiary Arco Investeeringud has entered into certain agreements with SIA Linstow
Baltic, a Latvian subsidiary of the Norwegian based Linstow AS, a leading investor, developer and
operator of shopping centres in the Baltics. The agreements detail the terms of the acquisition by SIA
Linstow Baltic of 50 per cent in the Bišumuiža 2 project in Riga, Latvia, currently owned by the
Group and Viktors Savins. These agreements are subject to conditions, including the Group curing a
certain default in relation to its agreement with the City of Riga regarding part of the land intended for
this project. For further details, see “Management’s Discussion and Analysis of the Group’s Financial
Condition and Results of Operations – Recent Developments”.
In the event that the Group fails to cure this default or fails to negotiate a settlement with the City of
Riga or if any other condition is not fulfilled, SIA Listow Baltic may refuse to close its transaction
with the Group or rescind it after closing, which could have a material adverse effect on the Group’s
business, results of operations and financial condition.
Ability to obtain construction rights, construction and environmental permits and other
approvals
In order to secure development projects, the Group must often acquire land for which no detail
planning has been prepared or adopted or for which the existing detail planning does not provide
construction rights suitable for development. In order to commence development on the site, the
Group commissions detail planning for the envisaged project and submits it to the planning authorities
of the municipality. Detail planning normally details the division of land units, determines the
construction rights attaching to each unit, delineates the area that can be occupied by buildings and
determines the areas reserved for streets and other infrastructure.
The planning approval process by municipalities is an administrative process and is subject to strict
statutory requirements. The approval process of the detail planning has several stages. The draft detail
planning is subject to several analyses and surveys, and is made public and subject to a public hearing.
The process may last several years and require the Group to prepare additional documentation or
analyses. Depending on the results of the process, the intended use of the land, the maximum number
of buildings on the land, the maximum height of the buildings or other details of the plan could be
restricted by the authorities.
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