Prestbury Investments to float as REIT

Two well-known business personalities Nick Leslau and Sir Tom Hunter are planning to float a £1.5 billion property portfolio, including Warwick Castle, Alton Towers and London's Madame Tussauds, as a real estate investment trust on the Alternative Investment Market.

Leslau's Prestbury Investments is the landlord of Merlin Entertainments, and will continue to manage the property assets, which also includes 21 hospitals operated by Ramsey Healthcare, according to the Financial Times. Once floated the intention is to use gearing of about 75% and issue additional shares to gather total assets worth about £3 billion, which would elevate the company into the FTSE 250, and instantly lift its share price.

Plans are for the fund to issue equity to property investors, such as banks, in return for real estate with long leases. As debt falls from 75% to 30%, these shares should become attractive to pension funds seeking long-term rental income streams with guaranteed future rental increases providing inflation-proof returns.

In December Prestbury sold a portfolio of 13 care homes to Legal & General for just over £70 million, for the insurer to match the income streams required by its pension annuities business. The 13 homes form part of a portfolio of 21 owned by Prestbury, which it wrote down to a zero equity value in 2010 following "tenant problems", according to its 2010 accounts.

The initiative is a good plan and less vulnerable to wild speculation than the typical cash shell as it will contain real assets. Leslau and Sports Division founder Sir Tom says they plan to retain their current stakes.

For the entrepreneurs, it might also put to rest the Knutsford debacle of 1999, in which Leslau along with City financier Nigel Wray and former MP Archie Norman, floated a cash shell which proved to be the last quick money-making float of the dot.com bubble, but flopped when they then failed to buy a big retail chain as planned.

Today's move also follows the Prestbury's team's float of Max Property in 2009, a different closed proposition with assets of £319 million, including the St Katharine Docks marina, offices in High Holborn, London and a portfolio of pubs.