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One of Russia’s largest high-end office owners is set to list on the London Stock Exchange in the latest example of a European property company looking to diversify its financing.
O1 Properties, which owns about $2bn-worth of offices in Moscow, will announce on Wednesday that it plans an initial public offering in London.
The traditional bank lending market has retrenched as lenders battle to shed their exposure to the sector ahead of tougher regulatory barriers to holding real estate, forcing property groups to seek alternative sources of finance.
The move could also kick off a new round of Russian companies trying to list on the London stock market.
O1 Properties has appointed Morgan Stanley and UBS and VTB Capital as joint bookrunners to help it raise new cash to pay down debt and fund acquisitions in its domestic market. Although it is unclear how much the company intends to raise, $500m has been suggested previously as a likely target.
The group owns and manages a portfolio of eight completed office buildings in Moscow’s central business districts. The portfolio comprises a total net rentable area of 321,000 sq m.
The O1 roadshow is the first for a Russian company since last summer, with the exclusion of Ruspetro, an oil company, which raised $250m last month after a quiet one-day bookbuild.
Should O1 succeed in coming to market, it could be the biggest Russian listing since last June when Phosagro, the potash producer, raised just over $500m.
While there was a wave of Russian flotations in the years preceding the global financial crisis, groups from the region have faced a tougher time since as investors cast a more sceptical eye on offerings and look for discounts.
Of the 12 Russian groups that launched roadshows in 2011, only six made it to market, with many of the ones that did pricing at the lower end of their targeted range.
Bankers are optimistic that 2012 will see greater activity on the primary and secondary markets, with major names such as Megafon, the mobile operator, and Sberbank, the state lender, attempting capital raisings. But they said most activity would probably be in the second half of the year when there was expected to be a better sense of market stability.