Find the right REIT

Well it looks like Tesco is not going to come back to my target entry price of 400p any time soon so I need to invest the proceeds of my sale somewhere else.

HBOS looks solid but that would leave me with too much exposure to the banking sector (35%.) Aberdeen Asset Management looked nice but I wasn't sure how well it would do in a recession.

Recently the government has brought in Real Estate Investment Trust legislation which allows property companies to operate on a tax free basis as long as they return at least 95% of their income to the shareholders. Buying into a REIT would be a good way of diversifying my mortgage portfolio and the share price performance of a couple over the last five years certainly looks impressive:

That was British Land in blue against Land Securities. British Land certainly has an edge there.

Fundamentals? The market cap. is about £7.5 Billion, the 2007 PE is 30 and the yield is about 2%. The EPS growth rate is about 13%. The PE looks high but this is always the cause with real estate companies which are valued close to their net asset value. In the case of BLND the NAV is about 1610 pence per share so the current share price of 1470 represents a significant discount.

Chairman Chris Gibson-Smith says "The business continues to make good progress and is well positioned for the future.” A suitably bland but comforting statement!

So why buy BLND? It offers diversification, a quarterly rising dividend and solid long term prospects.

The recent market correction has taken 15% off the share price so now may be a good time to buy. My Sharebuilder account will be buying in for me in a day or two so my money is where my mouth is!