Many FTSE 100 property companies are currently trading on low valuations. They also offer high dividend yields, which suggests buying a portfolio of them could generate attractive investment returns over the long term.
One blue-chip property stock that stands out is real estate investment trust (REIT) Landsec (LSE: LAND).
Challenges in the retail sector
The company has fallen out of favour with investors recently due to continued challenges in the retail sector. However, Landsec has been able to avoid the worst of the sector’s turbulence due to continued high demand for office space in London.
Landsec has continued to refine and develop its offering despite sector headwinds. Management has reorganised properties to produce the best returns and sold off those with the worst outlooks. The company has also been developing its own flexible office brands.
Myo offers flexible office space while Landsec Fitted offers slightly longer-term leases with fully fitted-out space. The company has also launched Landsec Lounge, a communal, break-out space offering for tenants that has been piloted at London’s Cardinal Place, SW1.
These offerings are proving popular, according to the company’s latest trading update, which suggests management is making the right moves.
Landsec is now planning to invest large sums of capital in its London property portfolio. In its latest trading update, the company also informed investors it’s planning to push ahead with 1m sq ft of new buildings across the capital.
This £3bn development portfolio seems to be a good investment for the long run. Landsec believes London will face an office shortage in the years ahead, and the company wants to make sure it has plenty of capacity to meet customer demands for the next decade.
These forward-thinking development plans should help the business stay ahead of the crowd, and produce a steady growing income for investors over the long run, as well as capital appreciation.
However, despite the firm’s growth plans, Landsec currently trades at a significant discount to its net asset value. The stock trades on a price-to-book (P/B) ratio of 0.8, which suggests the shares offer a wide margin of safety and could be good value compared to other FTSE 100 stocks. Alongside this low valuation, the company also offers its investors a dividend yield of 4.8%.
With the demand for office space likely to continue to outpace supply for the foreseeable future, now could be the time to buy London-focused property companies like Landsec.
The company’s strengths could help it navigate a tricky market and emerge the other side in a stronger position than many of its peers. As such, now could be the time for long-term focused investors to snap up shares in this deeply discounted REIT as Brexit uncertainty to continues to weigh on its share price.
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Rupert Hargreaves owns shares in Landsec. The Motley Fool UK has recommended Landsec. 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.