These shares look set to play catch-up with the market.
There are good commercial property companies, and there are those that dress up their mutton-like figures as tasty lamb. It isn't always easy to tell which is which -- and there are many in the middle.
With all the retail woes and the decreasing relevance of premises for administrative purposes or as retail outlets, it pays to be selective. And there are plenty property companies out there to choose from.
But it's still a risky game. If excessive gearing causes loan to value covenants to be breached, then the NAV may not save your investment. Cash is king.
Many of the big blue-chip commercial companies such as British Land (LSE: BLND) and Land Securities Group (LSE: LAND) now stand at or around their net asset values (NAV). These two are both FTSE 100 companies and perceived as relatively safe, understandably, with sustainable yields.
But there are opportunities at substantial discounts to NAV further down the food chain. The trick is in finding those whose discount looks real and whose income should be sustainable.
We can't look at them all, but I've selected a few that look good NAV discount, high-yield candidates and in which I've put my money where my mouth is:
1. McKay Securities
My overall favourite remains Real Estate Investment Trust (REIT) McKay Securities (LSE: MCKS) due to its conservative profile -- as I explained last month.
The shares are virtually unchanged at 131.5p, which is a healthy 40% discount to the net asset value (NAV) of 197p per share quoted with the company's final results to the end of March.
McKay recently told us that the positive trends it sees are continuing. The combination of this REIT's steady approach, its discount to NAV and 6.3% or better forward yield look too tempting to ignore.
2. Invista Foundation Property Trust
A recent Foolish discussion thread on the Invista Foundation Property Trust (LSE: IFD) caught my eye.
At 38.5p per share, Invista is valued at £137m, but has an unaudited NAV of £176.5m -- 49.6p per share. Net of cash, the company's loan to value ratio is 38% against a covenant of 60%, and 85% of its rental income is from low-risk tenants. For example, its top three tenants are Wickes Building Supplies, Norwich Union and BUPA.
The annual dividend total (paid quarterly) of 3.52p makes for an unrealistically high yield of over 9%. The market seems to think this is unsustainable, but acquisitions of real estate with even higher yields, and investment in asset improvements, should mean that the dividend cover also improves markedly.
3. Public Service Properties Investments
Another property company with an unfeasibly high yield is AIM-listed Public Service Properties Investments (LSE: PSPI) which specialises in care homes.
I bought a few of these recently as I perceived the company's share price had received an unfair "read across" battering, courtesy of Southern Cross Healthcare's (LSE: SCHE) well-publicised troubles.
PSPI's share price touched 60p, before rallying to its current 74p, at which the yield is close to 9.5%, and which compares favourably with the NAV of 120p / adjusted NAV of 150.5p taking account of deferred tax.
In addition to its 39 care homes in the UK, PSPI also has 14 care homes in Germany and Switzerland, and 140 post offices in the US. Its main client is UK privately-owned European Care Group and as long as there are no huge problems with this care provider, the rental income should be safe and should increase helping to ensure the dividend is fully covered.
4. Tamar European Industrial Fund
In June, I explained why I thought shares in Tamar European Industrial Fund (LSE: TEIF) remain good value despite recent rises.
Tamar isn't appealing on regular income, but the company's plans to dispose of its properties in Scandinavia and realise up to £100m in the process could see a cash return to shareholders at some point.
The company plans to buy property in mainland Europe where it sees excellent investment opportunities, but if it doesn't find them, it'll give us shareholders some cash back. Meanwhile, its share price of 48.5p (which values Tamar at £68m) is just 58% of its NAV (adjusted to add back deferred tax) of 83.6p or 59.7p ignoring the deferred tax.
More from David Holding:
> David owns shares in McKay Securities, Invista Foundation Property Trust, Public Service Properties Investments and Tamar European Industrial Fund.