Opportunistic property investor NewRiver Retail has suspended plans for a 250 million pound ($406.3 million) listing on London's Alternative Investment Market stock exchange, a company spokeswoman told Reuters.

She said NewRiver Retail was now reviewing its options after postponing the initial public offering, which was being arranged by Merrill Lynch (BAC.N) against a backdrop of turbulent real estate and equity market conditions.

The suspended float was poised to be the biggest new listing in Europe so far this year.

NewRiver Retail is led by real estate market veteran David Lockhart and is chaired by former Merrill Lynch banker Paul Roy.

Lockhart is best known in the UK property industry for selling off his former AIM-listed property firm Halladale to Australia's Stockland Group (SGP.AX) in 2007, close to the peak of Britain's white-hot property market.

Earlier this month, fund managers told Reuters the proposed floatation had been well received among those keen to exploit opportunities carved out by one of the deepest UK commercial property downturns in living memory.

Doubts over the longer-term health of the British property market have dampened enthusiasm for the stock, with few signs of relief in the seized-up mortgage markets and stubborn concerns over the state of the economy.

The size and stories of equity offerings need to be tailored to the evolving dynamics of real estate and equity markets, Nomura analyst Mike Prew said.

In this case the message appears to have failed to get through but I do not doubt there are more to come, he said.

Since June 2007, average commercial property prices have nosedived close to 45 percent, with further falls expected this year and next.

In May, experts from the Investment Property Forum predicted average commercial property capital values to fall 21.6 percent in 2009, worse than a 17.9 percent drop forecast in March.

News of NewRiver Retail's postponed float comes shortly after the successful AIM float of Max Property Group (MAXP.L), another company formed to invest in bargain UK property assets.

It raised 200 million pounds in an IPO last month and its shares are trading at a 17 percent premium over listing price.

(Reporting by Sinead Cruise; Editing by Andrew Macdonald) ($1=.6153 Pound)