Raven Russia Ltd (LON:RUS) has announced the conditional acquisition of three properties in St Petersburg for RUB4.9bn (c $82m), below their replacement cost, which will generate rent of $13m in the first year of ownership (c 16% initial yield). The acquisition will be funded from existing cash reserves and is expected to be complete by the end of February. We maintain our previous forecasts pending the completion of the acquisition and the publication of Raven’s FY16 results on 13 March 2017.
Prudence paying off
The assets are an 87,000sqm logistics hub and two office properties totalling 33,000sqm, all in attractive locations around St Petersburg and 98% let on leases up to four years, mainly denominated in roubles. This acquisition shows the benefit of Raven’s efforts to build balance sheet strength to withstand market headwinds and position the company to take advantage of opportunities. We understand that the ability to acquire all three assets and to act quickly were central to the bid’s success. Raven’s balance sheet remains strong, possibly enabling further debt reduction, and the acquisition adds to the positive recurring cash flow.