U.K.'s Raven Putting $875M Into Russia

Guernsey-based Raven Russia Limited is planning to invest £500 million ($875 million) to buy and build warehouses and logistics centers in Russia over the next two years, according to Anton Bilton, chairman of the board of Raven Group.

Raven Russia plans to raise £140 million of the £500 million through a share flotation on the London Stock Exchange at the end of July.

The rest of the money will come from major multinational institutional investors.

Bilton said his company was interested in Russia because of the country's high economic growth relative to Britain.

"We intend to make profits on our investment of around 14 percent per year," Bilton said. He said Raven Group would invest the money in warehouses, logistics parks and supermarkets.

Currently the British investor is looking for a partner in Russia, promising to announce one by the end of the month.

"Negotiations are under way with several Russian developers," Bilton said.

Investment company and developer The Raven Group, which was formed in 1992, is owned by Raven Mount, which has invested £1 billion ($1.75 billion) in Britain and Croatia. It has a listing on AIM, which is run by the London Stock Exchange. Raven Group's earnings in 2004 were ?83 million.

Experts said the choice of ready-made properties available for a new investor would be small, and the company would need to work as a developer.

"Warehouses are an exceptionally attractive sector but one of the least developed on the Russian real estate market," said Sergei Riabokobylko, managing director of Cushman & Wakefield Stiles & Riabokobylko.

Riabokobylko said that the British company would be forced to invest money in building warehouses, as as the market lacks ready-made logistics complexes.

In order to invest the £500 million, the company will most likely have to become involved in development, said Oleg Myshkin, a director at Colliers International.

Bilton acknowledged that Raven Group was not looking exclusively at ready-made properties.

Currently there is only one ready-made warehouse for sale on the market. BEL-Development, one of the structures of Basic Element, is selling a complex in the Moscow region. Representatives of Raven Group said that they were aware of the offer, but that they were not planning on investing money in that project.

"Of course, the market will absorb that amount of money, but without a good Russian partner, Raven Group will have little hope for success," said Alexander Nikolayev, the managing director of MCTrustco, which represents the interests of several Western investment funds in Russia.

Experts noted the unsuccessful experience of the large American company Prologis, which invested in the building of warehouses. Six months ago, the company ended its activities in Russia, not having found a suitable site to build on.

Raven Russia is the third public Western company to have shown an interest in Russian real estate.

In 2004, the Swiss investment company Eastern Property Holdings, whose shares are sold on the Swiss stock market, bought the Berlin House office center on Ulitsa Petrovka for more than $40 million from Westdeutsche Immobilien Bank.

EPH also bought a blocking stake in Mosmart, operator of the hypermarket chain of the same name, and Hypercenter-7, which owns Mosmart's real estate. Experts estimate the value of the deal at between $25 million and $30 million.

At the end of May, Mosmart found another Western partner, Jelmoli Holding.

The publicly listed Swiss company spent $73.5 million for 49 percent of Hypercenter Investment, which is a company that was specially formed for the development of the Mosmart chain.