Tallinn puts Linnahall reconstruction project on hold

  • 2022-04-27
  • BNS/TBT Staff

TALLINN – The Tallinn city government decided at its Wednesday's meeting to postpone the preparation of the selection procedures necessary for the reconstruction and  recommissioning of the Linnahall arena until the circumstances and the market situation are clearer.

"It is not reasonable to move forward with the Linnahall project according to the current plan, and the continuation of the project should be decided once the economic and political situation has stabilized, it is again possible for investors to make considered decisions and adequately assess their opportunities and risks," the minutes of the meeting of the city government say.

On Feb. 10, the city government entered into a procurement agreement with KPMG Baltics OU, which, in its capacity as a business advisor, collected information from potential investors as well as financial institutions and prepared a pre-transaction analysis.

The analysis concluded that, given the obstacles to supply and the price increase and its unpredictability, construction companies are not prepared to make long-term forecasts or enter into fixed-price contracts, which has led to uncertainty among investors.

Uncertainty among potential investors meanwhile leads first and foremost to a reduction in interest for large-scale projects, so there is a high risk that the selection process will not result in a sufficient competition to ensure the expected outcome.

The analysis emphasized that the public sector's financial support is crucial for the success of the project. At the same time, in today's conditions it is difficult to calculate what could be an adequate amount of support from the city, as in the current market situation it has become impossible to calculate the cost of the implementation of the project. As a result, the risks associated with the project have also increased significantly.

Therefore, the analysis suggests that it is more economically prudent to decide about the feasibility and size of the city's support and, in this respect, to map out more precisely the expectations of potential investors once the economic and political situation has stabilized, in order to ensure that the city's resources are put to proper use.

Andrei Novikov, deputy mayor of Tallinn, said the city will continue to prepare the terms and conditions for the competition to find a private sector partner. 

"We will continue our search for partners for the reconstruction of Tallinna Linnahall. We are working to find potential partners, and we will also continue with those who have been interested in this project," he said.

"At the moment, it is difficult for both a potential private investor and the city to predict the size and schedule of the necessary investments. Therefore, we will decide to announce the competition to find a partner in the private sector for the reconstruction and assignment of the Linnahall when there is a more favorable situation in the market," Novikov added.

Linnahall, an entertainment and sports arena with a seating capacity of 4,200 situated next to Tallinn's passenger port, was completed in time for the sailing events of the 1980 Moscow Olympics held in Tallinn. The volume of the structure designed by Estonian architect Raine Karp is 247,320 cubic meters, and the building has three floors above the ground and two underground floors.