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Arsenal: Infortar highest bidder twice, rejected without reasons given, plot eventually sold for millions less

The Arsenal shopping center today.
The Arsenal shopping center today. Source: (Rene Suurkaev/ERR)

The plot of the recently opened Arsenal shopping center, eventually developed by a company belonging to businessmen Aadu Oja and Reform Party heavyweight Rain Rosimannus, has a more interesting transaction history than previously known.

According to daily Päevaleht, investment holding Infortar (Tallink, Eesti Gaas, among others) wanted to buy the Arsenal plot in Tallinn in 2007. When then-owner E-Arsenal, a state-owned munitions producer, was looking to sell it to the highest bidder, Infortar won, but eventually was rejected twice.

Infortar was the wrong winner

Infortar CEO Ain Hanschmidt told Päevaleht that they were rejected twice with no explanations offered. He said he had wondered at the time who was able to put a stop to a process so big and with such a price. “And twice! But apparently we simply weren’t the right winners,” Hanschmidt said.

Infortar made two bids, one over 50 million kroons (€3.19 million), the other over 84 million (€5.36 million).

Infortar intended to use the Arsenal plot to build offices and support infrastructure for shipper Tallink Group. The plot is located close to the sea, which would have made it a good choice. Tallink’s offices were later accommodated in a new building closer to the port terminals.

The Arsenal property then passed over into the possession of state-owned real estate company Riigi Kinnisvara AS (RKAS) in 2009. In 2012, the plot changed owners again, when it was sold to a holding controlled by real estate developer Aadu Oja—an enterprise, as it turned out just recently, long-time Reform Party big wheel Rain Rosimannus was involved in as well.

Plot sold after the boom for millions less

Oja and Rosimannus’ company was able to buy the plot from RKAS for a mere €1.52 million.

At the time, Taavi Rõivas, to be made prime minister two years later, was RKAS’ supervisory board chairman. The transaction got the attention of the Riigikogu’s Anti-Corruption Select Committee, and Rõivas was duly summoned to answer questions. But as the National Auditor’s Office confirmed as well, the transaction had been made within all the rules and competencies of RKAS.

Now, with the information about Infortar’s rejected bids, the name of another prominent member of the Reform Party appears. Eerik-Niiles Kross was E-Arsenal’s supervisory board chairman at the time Infortar made its two winning bids in 2007. Back then, Kross was a member of the Reform Party's coalition partner, IRL.

Kross explained to Päevaleht that they didn’t sell the plot at the height of the real estate boom because they were still hoping to turn E-Arsenal into a working defense contractor. “We could have sold at 80 million, but we didn’t consider that very clever. My vision was to recreate E-Arsenal as a properly working defense industry company,” Kross was quoted by the paper.

Arsenal was recently reopened as a shopping center. Rain Rosimannus’ investment was veiled as an option in the name of Aadu Oja, who was the director and one of the owners of the shopping center’s parent firm, Arsenal Center. Before Christmas, however, Singaporean firm Roy & Klas Pte. Ltd, behind which was Rosimannus, became a shareholder of Oja-owned AO Arendus.

Rosimannus said it had been decided at the time to draw up the transaction as an option as the whole of Arsenal’s development had to happen in a Tallinn ruled by Edgar Savisaar. Because of the political situation they had lacked full certainty that his involvement in the Reform Party wouldn’t be used as a pretext for biased treatment by city powers, which could have undermined the entire project.

Failed state company never produced quality required to be successful

E-Arsenal was a state-owned defense company. In all its time since its establishment in 1994, it never managed to reach a level of quality and reliability that would have been sufficient for major contracts. According to the bill that led to its eventual liquidation in 2012, both the National Audit Office and the Ministry of Defence had repeatedly complained about the lack of quality of E-Arsenal’s work.

Local production of munitions ended in 2007, after which the company remained in business for a few more years based on hiring subcontractors for the products it marketed. In 2009, the government decided to move all of the company’s real estate assets to RKAS.

Editor: Editor: Dario Cavegn

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