Russia's largest retailer, X5 Retail Group, signs new 76,000-m² lease in Moscow (RU)

The Board of Raven Russia Limited is pleased to announce a significant new letting with a subsidiary of X5 Retail Group. X5 has agreed to lease a total of 75,681 m² of warehouse and ancillary space at the company's Noginsk project in Moscow.


Raven Russia's Noginsk project in Moscow.

A total of 30,781 m² of the letting is for cold storage and the company has agreed to invest a further $16 million (approx. €11 million) for conversion of this element, with occupation expected in November 2011. Occupation of the standard warehouse space will commence in July 2011. The lease has a 10-year term, without break, and a blended warehouse rent of US $141/m². The company's Noginsk project has a completed phase of 123,000 m², which is now 85% let, and a second phase comprising 40 hectares of permitted land.

The Board is also pleased to announce the signing of a US $38 million term loan facility with ZAO Raiffeisen Bank of Russia, to be secured on the completed phase 1 buildings of the Klimovsk warehouse complex in southern Moscow. The project comprises 55,000 m² and is fully let.

The Raiffeisen facility has a term of nine years and is expected to be drawndown in full in June. On drawing the Raiffeisen facility, the Group's total cost of debt will reduce from 7.0% to 6.9% and total Group debt will increase from US $455 million to US $493 million.

Southgate acquisition
Following the announcement on February 28, 2011 of the signing of a conditional sale and purchase agreement for the acquisition of the Southgate warehouse complex in Moscow, the Board confirms that it has been notified by Cypress Grove International ('CGI') that they have received a formal right to match the company's offer, from the minority shareholders of Karta Realty Limited.

There are a number of conditions that are required to be met before the purchase can be completed by the minority shareholders. The Board will issue an update in due course.

Should the minority shareholders complete the acquisition, the vendor is required to pay the company a break fee of US $2.5 million.

Trading update
The company's annualized net operating income is currently US $103 million, including the X5 letting, increasing to US $109 million with pre-let agreements ('PLAs') and letters of intent ('LOIs'). The company's warehouse portfolio is now 78% let, increasing to 83% on conversion of PLAs and LOIs. The company will be making its next Interim Management Statement on May 16, 2011.

Glyn Hirsch, Chief Executive of Raven Russia, said: "This is our second deal with X5, the largest retailer in Russia, and is a significant letting for the Company. It takes a large proportion of the remaining vacant warehouse space in Moscow out of an already under supplied market.

"The annualized NOI on our existing portfolio is now over US $100 million which is a major milestone for the company. The news of a matching offer on Southgate means that other investors are beginning to understand the potential of warehousing in Moscow, which should be good for valuations."

Source: Cardew Group

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