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With a central London-focused portfolio, Great Portland Estates (LSE: GPOR) is generally considered to be one of the most secure property companies the UK. 

However, looking at the company’s current valuation, you could be forgiven for thinking that the market does not think much of the firm’s prospects. Indeed, at the time of writing, shares in Great Portland are changing hands for a little less than 600p each, compared to the net asset value of around 700p. This indicates that you can get your hands on a portfolio of highly sought-after central London property at a discount of around 15% to market prices.

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Business as usual 

According to a trading update issued by Great Portland today, it looks as if the underlying business is performing well despite the market’s sentiment towards the firm. For the quarter to 30 June management signed 20 new lettings, generating an annual rent for the business of £6bn. Further, 10 rent reviews were settled during the period for an extra £3.8m per annum. The fact that these reviews resulted in rents being set 62% above previous passing rent levels shows that there is still strength in the London property market.

A total rent roll of £115.9m was recorded for the period, up 5.7% during the quarter with a vacancy rate of 6.5%. As well as these developments, Great Portland announced some new property purchases and development plans designed to improve the yield on the group’s property portfolio. At the end of the period, the company had a conservative loan-to-value debt ratio of 14.1%.

No income 

It looks as if it’s business as usual for Great Portland and if you’re looking to buy into the London commercial property boom, the shares look to be a steal at current prices. 

The one thing Great Portland does not offer, but many of its peers do, is an attractive dividend yield. At the time of writing the shares support a yield of 1.8%, well below British Land’s (LSE: BLND) current yield of 5.1%.

A better buy? 

If you’re looking for a property company with exposure to London, trading at a discount to net assets and that offers a healthy dividend yield, then British Land could be the one. The company owns a selection of properties in London as well as around the rest of the UK. 

Concerns about the state of the UK property market, and in particular the commercial real estate market, have sent the real estate investment trust’s shares sliding and they currently trade around 30% below their 2015 peak. 

However, after these declines, the shares trade at a discount of around 30% to the group’s net asset value of 915p as reported for the year ended 31 March. This discount makes the shares marginally more attractive than those of Great Portland, as while Great Portland owns a portfolio of prime London property, British Land is both cheap and supports a sector-leading dividend yield. 

If you’re looking for a bargain in the property sector, it might be worth taking a further look at British Land.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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