MEPC, the under-performing property giant which has been under constant pressure from shareholders dissatisfied with the lack of value in the company, has found a buyer for a portfolio of smaller properties, mainly shops and offices in the London and Manchester.
James Tuckey, chief executive of MEPC, promised six weeks ago to return pounds 300m to shareholders, roughly the same sum as will be realised by the deal with GE.
At the same time the group's American and Australian businesses were put up for sale with an estimated price tag of around pounds 580m. But these assets accounted for less than a third of MEPC's net assets of around pounds 1.9bn, yet they contributed 48 per cent of underlying profits in 1996. Selling them was expected to force MEPC to cut its dividend for 1997/98 from 20p to 12p. This may not now be necessary.
The smaller properties which make up the bulk of the new deal with GE were also surplus to requirements as MEPC increasingly focused on bigger property units, but were considered more difficult to dispose of. Selling them will allow MEPC to take advantage of the marked recovery in commercial property values in the UK and will remove some of the pressure to sell the American and Australian assets quickly.
GE has been active in the UK property scene since 1986 as a lender, investor and backer of joint ventures. Its current UK asset value is around pounds 700m and consists of a mix of properties, typically 35 per cent offices, 45 per cent in shops, shopping centres and retail parks and 20 per cent industrial. Since March 1994 it has completed 13 big deals including four this year but the MEPC deal will be the largest yet.
World-wide, GE Capital Services has a property portfolio of around $16bn, and GE Capital Services itself has assets of $227bn with 27 specialised businesses.
MEPC earlier this year rejected merger offers from Hammerson. In the summer it held talks with Burford, another underperforming property group with assets of around pounds 500m but they were quickly discontinued. Meanwhile, MEPC bought PSIT, a property investment trust, during the summer for pounds 247m. Some of PSIT's properties are expected to feature in the sale to GE.
MEPC last week announced it is to move from its prestige office in St James's Square in London, where rents are commonly pounds 50 a square foot to offices in Wigmore Street, where rents are around pounds 35 a square foot.
MEPC shares rose 3.5p on Friday to 519.5p, up 7p. It values the company at pounds 2.18bn.