Property giant goes to town to shop for profit

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The Independent Online
PERSONAL DETAILS: Aged 48. Lives in London and Hampshire. Drives "as little as possible. Cars are wholly unimportant to me".Owns a Galaxy people carrier. Paid pounds 343,000 in 1998.

CHALLENGE: MEPC, the UK's fourth-largest property company, has undergone major changes in two years. It sold all of its overseas assets, about one-third of the business. Smaller properties in its portfolio have been sold and the group's finances have been restructured to give lower gearing. The company moved to new headquarters in London and some non-core functions have been outsourced.

MEPC is now focused on investment and development in the UK in office, business space and large in-town shopping centres. "We are a leaner and more focused organisation," says Mr Dundas. He feels the challenge is to get the benefits out of the restructuring and deliver them to shareholders.

CORPORATE BACKGROUND: Mr Dundas joined MEPC as group finance director in 1997. From 1992 to 1996 he was finance director of the Airport Authority in Hong Kong. Before, he was head of corporate and international banking at Morgan Grenfell.

STRATEGY: MEPC's activities are focused heavily on London and the south- east of England. Mr Dundas sees it as "the marketplace in the UK, which in broad terms is going to get more than its fair share of the GDP growth cake". The property portfolio covers offices in the City of London, Birmingham, Glasgow, and New Square Business Park near Heathrow. In the retail portfolio are the West One shopping centre in Oxford Street, London, and shopping centres in cities such as Belfast, Sheffield, Guildford and Worcester. Mr Dundas says in the low-inflation environment, quoted property companies increasingly have to manage their property actively to achieve adequate shareholder returns. He believes quality properties and buyers generate faster income streams than general refurbishments and companies need to add value. "We need to be more than just an investment company," says Mr Dundas. Much of the group's out-of-town commercial space has metamorphosed from industrial properties to warehousing to business parks.

"This business is about meeting occupier needs," says Mr Dundas. "We need to try to identify and anticipate what quality occupiers want." The pace of change is thought to have quickened, reflecting general changes in technology and the employment market. MEPC's business space, which has had significant investment, has shown the fastest growth rates in two years.

In the retail market, MEPC is focused on the management and development of large urban shopping centres that, "either are, or we intend to make, the dominant one in the town", says Mr Dundas. The criteria for investment are a strong, important provincial town with a significant catchment area.

Property developers were badly hit in the property crash that followed the economic boom in the late Eighties. Mr Dundas says MEPC is very keen not to overcommit itself to speculative developments. Mr Dundas does not believe the commercial property market is overheating in Eighties' fashion.

MANAGEMENT STYLE: "I am quite demanding in the sense I want quality people," he says. "If you get quality people and are clear about what you want to do that is the way you achieve results." He likes change. "I enjoy fronting up to a problem and working my way through the right solution." He does not have "a hands-on style". He sees his role as having "clarity about what the company is about and how that translates to shareholder value and then to communicate that".

MOST ADMIRES IN BUSINESS: Two banks, Lloyds TSB and HSBC, owners of Midland Bank in the UK. Mr Dundas likes Lloyds for its focus and track record. "It would be hard to hit upon a story that was more compelling and simpler than that," he says. In HSBC, Mr Dundas admires the determination with which the former Hong Kong & Shanghai Bank has "gone from its important but narrow structure to becoming a genuinely global organisation". The management of William Purvis and John Bond "has been outstanding".

CITY VERDICT: Property analysts at Merrill Lynch think MEPC, the company looks much better placed to perform in line, or even better, than its peer group. They say scope for outperformance comes from two areas, MEPC's focus on growth property (London offices, business parks, particularly in south-east England, and large retail) and the development programme, with good completed deals and lettings under its belt.

MEPC's underlying growth in net asset value is forecast to be 5.5 per cent in 1999 and 2000. Half-year results showing pre-tax profits rising to pounds 49.1m were ahead of expectations and led several analysts to upgrade their MEPC forecasts.