Raven Property (RAV), formerly known as Raven Russia, is swimming against the tide of a depreciating rouble and sentiment-dampening US sanctions. Not unreasonably, UK investors have steered clear of the group – which operates as a landlord for warehousing space in and around Moscow – despite the 27 per cent discount to net asset value (NAV) and a near-10 per cent prospective dividend yield. Raven is now looking for a more appreciative audience, with proposals to list the shares in Moscow and Johannesburg.
The major headwind is currency related. Historically, Raven guarded against the currency risk by charging its tenants in US dollars. The problem here is that with the Russian rouble falling through the floor, some tenants were being priced out of the market. More recently, Raven has switched to charging rents in the local currency, but this has simply shifted the currency exposure from the tenant to the profit-and-loss account where a local profit is turned into a dollar-denominated loss. Rouble-denominated leases accounted for 54 per cent of warehouse space during the first half, up from 47 per cent at the end of 2017, while dollar-related leases have fallen from 31 per cent to 29 per cent.
However, the trading position itself remains favourable. Net rental income during the first half was 13 per cent higher at $79.3m (£61.5m), while warehouse vacancy rates have fallen from 19 per cent to 14 per cent. Currently, the property portfolio comprises 1.77m square metres (sqm) of warehouse space and 49,000 sqm of office space. Demand is such that Raven is planning to speculatively build around 70,000 sqm at its Nova Riga site, which at today’s construction costs should deliver a 12 per cent return on capital employed. New warehouse lettings totalled 153,000 sqm, with a further 116,000 sqm of existing leases renegotiated and extended, while the office portfolio is fully let. Admittedly, underlying operating costs almost trebled on the same time last year, but this includes payment of bonuses relating to prior years, and will not be repeated in the second half.
