Mould and Vaughan are REIT men; but who are next men?

This morning Patrick Vaughan and Raymond Mould made good on their promise to shift London & Stamford from the Aim market to a full stock exchange listing on October 1st - and convert to REIT status. The conversion comes 6 months later than promised in an interview with me in EG last July. The twosome is also some £380m short of the £1b of gross assets they hoped to have acquired by April 2010. Nevertheless, the achievement of 69-year-old Mould and 63-year-old Vaughan in setting up what will become a fully-fledge REIT with £620m of assets in just three years is remarkable.

The newly-listed business will internalise its management by paying Mould and Vaughan's external management company £55m in return for not paying them £10m a year in fees. However, Mould and Vaughan are not able to walk off into the sunset with the cash. The consideration is being paid in the new company's shares that will give them and one or two other directors a 9.1% stake in the REIT. Those shares cannot be sold for three years - and if the new business does not reach certain targets a penalty charge will cost Mould and Vaughan £10m.

Shareholders should do well - the REIT has to pay out 90% of its profits as dividend and London & Stamford Limited seems to have bought in a wise and timely fashion. Those selling stock to what will be now be called London & Stamford PLC should be pleased: the REIT will need to up the percentage of cash spent from the current 60% to 75% by April 2013. Mould & Vaughan will also have done well by then - and should be able to walk off into the sunset with £55m - the third - and possibly last time -  the duo have correctly called the market in 30 years.

There is the ticklish longer term question of succession. Last July Vaughan countered that question giving strong support to his internal team: that presumably means that ex-Pears and Citigroup man Jeremy Bishop, or, possibly, ex-Duetsche Bank man Stuart Little are favoured for the job(s). But shareholders in a business that could become a multi-billion REIT in five years time may want to start asking questions now of who is going to run things after Mould and Vaughan retire: for it will be hard for anyone to outperform this matchless pair.