This is a low inflation world, and in the last two years MEPC has transformed itself into a company with the potential to generate smashing returns for investors in such an environment, Mr Dundas says.
Indeed, the transformation has been so radical the group says comparison of yesterday's annual results with the previous year is just meaningless. MEPC has cut its dividend, returned pounds 400m to shareholders, shed its overseas assets and trimmed its portfolio from 440 to 89 sites. The result is a better-than-expected 15 per cent increase in net asset value, to 630p, in this first set of results to reflect the performance of the new group.
The investment case for MEPC now rests on its exposure to unsightly out- of-town business parks and crowded town centre shopping centres. The former is an MEPC hallmark - the group spent pounds 193m, out of a total pounds 236m on development, in beefing up its business park portfolio last year.
Developing shopping centres, on the other hand, is hardly radical. Even so, the group sees retail as generating the fastest-growing rental growth in its portfolio. Returns here, currently 12 per cent, should rise to 15 per cent within 18 months or so, buoyed by the strong performance of successful retailers such as Gap and Matalan. Of the pounds 446m spent on acquisitions last year, pounds 90m went on Swindon's Brunel shopping centre and MEPC now has sites in Nottingham and Middlesborough on its shopping list.
This should help the value of the retail portfolio grow faster than the 5 per cent it achieved this year, compared with around 9 per cent in the in the business and office portfolio.
The group's office portfolio is perhaps less exciting, however, though two key City sites should be delivering revenues by the end of 2002.
It adds up to a development portfolio worth pounds 850m which should be worth over pounds 1bn on completion, almost three quarters already let.
But while this sets the stage for a 50 per cent increase in rental income, the jam is some way off and MEPC lacks a track record in its new guise. Its cost of capital, at 8 per cent, is high.
Analysts expect the group to post full-year net asset value of around 700p. The shares, down 5p at 470p, are attractive. Buy.