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's activity report 2022

Räni KV develops residential real estate in the city of Tartu and provides real estate agency services.

In 2022, 5 apartment buildings were completed on Kvartsi Street in Ränilinn and we also started the construction of two subsequent new buildings. The first half of 2022 is characterized by a high demand for new living spaces and a very sharp drop in demand in the second half of the year. The sharp rise in construction prices continued, which has significantly affected the cost of developing apartments and as a result, the prices of new apartments have also risen. This time, the rise in construction prices was due to the Russia-Ukraine war, which removed many cheaper building materials (originating from Ukraine, Russia and Belarus) from the market. Replacing the aforementioned materials with products from other countries proved to be costly. The rise in energy prices and overall inflation put a lot of pressure on the entire construction sector. In addition, many Ukrainian builders left to defend their homeland.

The sharp drop in demand in the second half of the year is largely due to the sharp rise in loan interest rates - the 6-month Euribor has risen from -0.53% to 2.7% over the year, i.e. a 3.23% increase, which has significantly increased monthly loan payments. Many potential customers have abandoned the purchase and preferred to rent. As a result, rental investors have also abandoned the purchase of new apartments and some have sold their rental apartments due to negative cash flow. On the positive side, it is good to see that banks continue to actively offer new housing loans and margins have fallen to the 1.5-2.0% range. This has alleviated the amounts spent on interest. Fixed loan interest is also offered for the first few years when issuing home loans.

By the beginning of the third quarter of 2023, the rapid rise in construction prices has ended and we expect a decrease and stabilization in construction prices as a whole, which is primarily driven by increased competition in the materials and labor market.

In 2022, Räni KV acquired a couple of properties suitable for the construction of apartment buildings, in addition, the detailed planning procedures of existing properties continued, including after the balance sheet date, our affiliated company established a large 16ha detailed plan in Ränilinn. The establishment of the Ränilinn DP opens up the opportunity to continue with the development of the city district in both the residential and commercial real estate sectors.

In 2023, we want to complete the unfinished apartment buildings and hand them over to the buyers. As of the end of the year, over 90% of the unfinished apartment buildings were covered by VÕL contracts and there was no stock of finished apartments. As a result, we do not have a financial risk that could be due to inventory and a sharp decrease in demand. We continue with the planning and design activities of new apartment buildings in Ränilinn, Siili Street and elsewhere in Räni

On the properties owned by KV. We are conservative with starting new constructions and plan to start only 1-2 smaller apartment building constructions.

We want to be in line with demand and do not want to take big risks. We hope for a decrease in interest rates and a recovery in demand in the long term. Home buyers are still interested in economical and quality homes.

Main financial ratios and their calculation methodology based on the consolidated report:

Indicator/calculation methodology 31.12.2022 31.12.2021

Short-term debt coverage ratio (current assets/short-term liabilities) 1.99 1.42

Payment ability ratio (current assets-inventory/short-term liabilities) 0.27 0.15

Net profitability (net profit/sales revenue*100) 7.87 35.82