14th Feb 2007 07:12
Raven Russia Limited14 February 2007 Raven Russia Limited ("Raven Russia", the "Company" or the "Group") Investment Update The Board of Raven Russia is pleased to announce the following update on theacquisition and financing of property projects in Russia. Investment Portfolio The Company owns two multi let warehouse and office buildings in Moscow(Southern and Baltia) which are both fully let and producing a yield on cost onan ungeared basis of 13.56%. The Company also has a controlling interest in acompleted warehouse development at Krekshino in the Moscow region where it hasforward funded the construction of 114,000m2 (1.227million ft2) of Grade Awarehouse and office space. Approximately 90% of the development is let. Theremaining space is expected to be let and income producing by the end of March2007. In total these three properties comprise 156,000 m2 (1.679million ft2) of GrossLettable Area ("GLA") and are expected to produce an annual income ofapproximately US$19.3 million on an investment of US$143 million (producing animplied yield of 13.48% once fully let). In addition, the Company has signed acontract to acquire an office building of approximately 15,800 m2 (170,128 ft2)in St Petersburg which it expects to complete, subject to the satisfaction ofcertain conditions, by the end of April 2007. Development Portfolio The Company has continued to progress its Development Portfolio with projects atShushari, St. Petersburg; Istra, Moscow; Noginsk, Moscow; Pulkovo, StPetersburg; and in Rostov on Don through its regional joint venture Megalogix.Each of these projects involves the construction of multi let warehouse andoffice buildings. Except for Megalogix, the Company has structured these asforward funded projects with local development partners, combined with aninvestment commitment on completion. The benefits to Raven Russia of forward funding include, inter alia, the abilityto secure assets in a low-stock, low-supply environment; the participation inany development profit which, together with accrued mezzanine interest, resultsin acquiring the assets on completion at more attractive yields; a greaterflexibility in corporate and financing structures and a simpler due diligenceprocess. The Company has contracted to commit an initial amount of approximately US$498million, gross of VAT, to the forward funded projects. A further US$184 million,gross, has been conditionally committed to fund, inter alia, further phases ofdevelopment and the acquisition of partners' interests in these same projects. These projects are estimated to comprise, when developed, approximately 670,700m2 (7.219million ft2) and Raven Russia Property Management, the PropertyAdviser, anticipates they will produce total net rental income of approximatelyUS$77.4 million on an anticipated end value of US$634 million, net of VAT, whenbuilt and let. These investments have been made by the Company on the basis ofthe Property Adviser's estimate that the yield on investment is expected to bein the region of 14% after accounting for forward funding financing income andthe Company's share of potential development profits. Construction work at Shushari, St Petersburg has commenced with the first phaseof 65,000 m2 (0.7million ft2), which has been pre-let on a 10-year lease toAvalon Logistics (LLC), expected to be completed by the end of 2007. At Istra, Moscow 100,000 m2 (1.08million ft2) is already under construction andthe first 50,000 m2 (0.54million ft2) should be ready for tenants by October2007. Demolition of the existing buildings on the Noginsk, Moscow site is almostcomplete and the Company is gearing up to commence works on site in April 2007.Phase 1 of this project will comprise 110,000 m2 (1.18million ft2). Megalogix Joint Venture The Megalogix Joint Venture has identified sites suitable for warehousedevelopment in four regional cities, is in the process of acquiring the first inRostov on Don and anticipates the others will be acquired in the next quartersubject to completion of due diligence. In Rostov on Don, the Company's local partner has already completed the rezoningof the land to industrial use and it is intended to start construction of thefirst phase of the project of 77,000 m2 (0.83 million ft2) this summer with thepotential to increase to 230,000 m2 (2.476 million ft2) in phased development.It is estimated this will require funding of approximately US$166.6 million withan estimated end value of US$200 million. The Joint Venture estimates that the projected end value of all four projects,once built and fully let, will be in the region of US$500 million. Deal Pipeline In addition to these projects, the Property Advisor is actively considering oris in detailed negotiations on a number of other projects which meet theCompany's investment objectives, principally in Moscow and St Petersburg. TheProperty Adviser estimates that the end value of these projects could amount inaggregate to approximately US$1.5 billion gross of VAT and including theCompany's share of the Megalogix joint venture. Whilst there is increasing investor interest in the Russian real estate marketthere is still little quality investment stock available which meets theCompany's investment criteria, but the Property Adviser has been able to use itsstrong local presence, structuring skills and track record to enter into anincreasing number of attractive transactions. The availability of debt financing from both international and local banks hasincreased, enabling the Property Adviser to negotiate more attractive financingterms which will enhance the Company's equity returns. A further update on activities will be provided with the announcement of theGroup's results for the year ended 31 December 2006 which is expected in lateMarch 2007. Enquiries: Tavistock Communications: (0)20 7920 3150 Jeremy Carey / Richard Sunderland This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RAV.LRAV.L