Buckle in for a rollercoaster
Nick Leslau, one of the nation’s most accomplished property players, argues that we should prepare for a new phase of economic volatility.
The economy is in for a mini period of ups and downs, says Nick Leslau
Buying property is no different to buying jeans, says Nick Leslau, one of Britain's most accomplished property entrepreneurs: "You want the best product at the cheapest possible price."
If Mr Leslau's property portfolio is anything to go by, you can rest assured that he has a pretty enviable wardrobe to boot. With a track record that few others in the property sector can boast, Mr Leslau is the chief executive and chairman of Prestbury Investments, which has a portfolio valued at around £3bn.
While others in the industry have struggled with the ups and downs of the UK property market over recent years, Mr Leslau has largely managed to stay ahead of the game. He called the top of the market in 2006 and, in 2008, told JC Business that he saw a crash coming.
Prestbury took a defensive position, moving out of all its conventional real estate and invested heavily in sale and leaseback deals. The company, which Mr Leslau co-founded with financier Nigel Wray, put together a portfolio including Madame Tussauds, Thorpe Park and Warwick Castle, plus 150 Travel Lodges and 21 private hospitals. He says: "If you think that the market is going to crack, you want to be in the most conservative type of property.
"People thought we were very boring but we bought those because it was a very defensive move." And a good move it proved to be. The long-term income strings meant Prestbury fared better than many other property companies during the crisis. "We haven't needed any rights issues or additional equity injections."
We must be sure we don’t over-regulate London
And in 2009, Mr Leslau had industry professionals talking again when he set up Max Property with ex-Helical Bar investment chief Mike Brown to snap up bargains in the recession, fuelling speculation that, as far as Mr Leslau was concerned, the market was bottoming out.
The AIM-listed firm became the biggest stock market flotation in Europe that year, raising £220 million. Max has picked up £300m worth of distressed sales stock, most notably the purchase of the Industrious Group in October 2009. They also bought a portfolio of ten late-1980s business parks, paying roughly £50 per square foot - less than the cost of refurbishing them. "The entry price is critical to any deal because we can compete and undercut any landlord in our market place.
"I don't like to hear that other people have let property in the same markets that we are in." He adds: "We like uncertainty. We like a dysfunctional market. There are always things to be done if you have money to spend."
That said, Mr Leslau, who lives in an eight-bedroom home in Mayfair, has not been unaffected by the crisis. Prestbury made a £20m pre-tax loss in its last financial year as a result of deals outside of property, writing off its entire £12m stake in British Seafood.
Mr Leslau says he did not expect the market to crack as much as it did. "This was unprecedented territory. We saw a 50 per cent drop in values for 12 months following the summer of 2008. I will never forget the feeling I had in the pit in my stomach when we had substantial cash deposits and there were runs on almost every bank."
So how does one of the UK's most accomplished property players view the next 12 months?
"I often try to think about where the rays of sunshine are out there and I am struggling, quite frankly. You don't have to be a rocket scientist to see that things are very tough. I think the economy is corrugated. There will be periods of mini ups and downs and that could last for two, three, four or five years. We just don't know."
He warns that "after so many years of abundance, the transition to a nil growth scenario is going to be quite painful - we are back to working hard for a living."
The son of a jeweller-turned-art historian, Mr Leslau is no stranger to hard work. He grew up in north London and, "academically average" by his own admission, at 17 he worked as an assistant shelf-stacker at a grocery shop in Belsize Park. He was quickly promoted to store manager and paid around £35 a week.
He went on to study French and German at Warwick but decided it wasn't for him. He qualified as a chartered surveyor and joined the Burford Group in 1982, helping to build it into a £1bn business. His first major deal was the Piccadilly Plaza Centre in Manchester.
Married to Maxine - the couple have three sons - Mr Leslau is an advocate of promoting entrepreneurship in the UK. He has strong views on the government and its impact on business. Commenting on the 28 per cent capital gains tax, he says: "We have a complete misunderstanding in government about the value of entrepreneurs.
"The government needs to attract investment, entrepreneurs and wealth and job creators. That is the lifeline of this country. SMEs account for 60 per cent of employment in this country. Why should someone who risks 100 per cent of their capital but shares the gains with the government be taxed at the same rate as someone who takes no risks with their capital and earns an income?"
He recently took his passion for entrepreneurship to the screen, featuring in BBC One's High Street Dreams in which he and Jo Malone, creator of the scent and candles company, helped individuals launch new products. He had previously taken part in Channel 4's The Secret Millionaire, giving away close to £400,000 to disabled people in Glasgow.
He cites the public sector cuts as one of the greatest challenges facing the UK economy. "To keep an economy bubbling along at the same time as making massive cuts is going to be difficult." He acknowledges that it "is a shame that it's taken a financial crisis to bring the government to its senses in terms of cutting the public sector, which is now so fat and bloated and such a drain."
Another concern is banking legislation. "We must make sure we don't over-regulate London in isolation. London has this incredible advantage for most of the biggest international operators because it's a benign place to do business."
While the coalition government is not the outcome he wanted, he concedes that "for now, it feels like a sensible alliance. Whoever is in government is going to be so chronically unpopular over the next few years that they must just as well share the burden."