Build A Strong Portfolio With 5 Top Quality REITs: Londonmetric Property PLC, Great Portland Estates PLC, Shaftesbury plc, Primary Health Properties PLC & British Land Company PLC
As the saying goes, there's nothing safer than bricks and mortar... but not all investors have the financial fire-power behind them to include physical property in their portfolio.
Real estate investment trusts provide a viable alternative. REITs give investors access to regular income streams, diversification and long-term capital appreciation. Here are five of the best REITs on the market today.
Londonmetric Property (LSE:LMP) is a great play on the commercial property sector but it's also a play on the online retail market as the company has re-aligned itself over the past year or so.
Management has changed the company's property portfolio so that it's now focused on eCommerce through retail-led distribution assets. These assets include the 1m sq ft pre-let distribution warehouse in Islip, and the 690,000 sq ft pre-let distribution warehouse in Warrington. Londonmetric currently offers a dividend yield of 4.4% and trades at a slight premium to net asset value, which stands at 129p per share.
Primary Health Properties (LSE:PHP) is another play on the non-residential sector. Primary Health, as its name suggests, is the UK's leading investor in modern primary healthcare facilities. This is a long-term, defensive business and the group's portfolio has a 99.7% occupancy rate with an average unexpired lease term of 16 years. Primary Health offers a dividend of 5.2% with a NAV of 308p per share.
That being said, Primary Health's dividend is not yet covered fully by earnings per share at present, although management is working towards full cover.
Shaftesbury (LSE:SHB) is, without a doubt, a play on London's buoyant property market. The company owns 14 acres of land in the heart of the West End and comprises some 580 shops, restaurants, cafes and bars. Unfortunately, this kind of premium exposure doesn't come cheap. Shaftesbury currently trades at a premium of 33% to its NAV and only supports a yield of 1.6% at current levels.
Great Portland Estates (LSE:GPOR) is another central London property investment and development company. However, unlike Shaftesbury, the company only trades at a 20% premium to NAV but Portland's yield is a disappointing 1.1%.
Nevertheless, Portland's prime property portfolio, as well as the group's strong balance sheet are two qualities that are worth paying for. At the end of September 2014 the company had a net debt to property value of 22%.
And finally, you can't go wrong with one of the biggest REIT's in the UK, British Land (LSE:BLND).
British Land has exposure to the London property market as well as other developments outside the capital. The group currently supports a dividend yield of 3.3% and reported a NAV of 769p per share at the end of the first half of last year.
But while British Land is trading at a slight premium to NAV, it has a strong pipeline of projects under development, including a 40-acre site at Canada Water and 80,000 sq ft refurbishment opportunity at 338 Euston Road, Regent's Place. So, there's plenty of potential for British Land's NAV to receive a boost from new projects over time.
Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.