Should I Buy Land Securities?

LONDON -- It's time to go shopping for shares again, but where to start? There are loads of great stocks to choose from, and I've got my wallet out. So here's the question I'm asking right now. Should I buy Land Securities (LSE: LAND  ) ?

Give me LAND
It's been a good year for investors in U.K. property giant Land Securities. The share price started the year at just above 6 pounds, but it looks set to end it more than 30% higher, at around 8.20 pounds. It has come a long way since dipping to around 3.70 pounds at the peak of the financial crisis, but has it got much further to go? In other words, should I buy it?

Slowly but surely
Given the mess the U.K. economy is in, property should be a disaster zone. House prices should be flattened, commercial property should be razed to the ground. But no. Rock-bottom base rates have bailed out bricks and mortar, while London's global status has safeguarded the capital's office rents, not to mention Land Securities' share price. It has recovered only slowly since March 2009, but remarkably steadily, while remaining around half its pre-crisis peak. Yet recent half-year results were disappointing. Earnings per share fell and revenue profit both fell around 10%. Net assets per share rose just a single penny to 922 pence. With consumers cutting back on their spending, even at Christmas, Land Securities' retail portfolio has also taken a hit. Another worry is that the deficit on its final salary pension scheme increased from 2.4 million pounds in March to 4.3 million pounds.

Battle of the Lands
There was some good news. Development lettings have exceeded expectations, with its office block in Fenchurch Street, nicknamed the Walkie-Talkie, 23% pre-let with a further 11% going through the legals. Void periods, where properties lie empty, improved slightly. Group debt declined, partly due to recent property sales, which were designed to release cash for new developments. Happily for investors, management continues to pursue a progressive dividend policy, paying a first dividend of 14.8 pence, up 2.8% on the previous half-year. Land Securities Group yields a modest 3.6%, which is more than you will get on cash, but less than you will get from British Land, which yields 4.6%.

Stuck in neutral
The initial dip in its share price when the half-year results were published in November has been clawed back. What happens next largely depends on prospects for London office rental growth in 2013. Goldman Sachs recently reduced its growth forecast, while simultaneously downgrading both Land Securities and British Land from buy to neutral, so that doesn't look too promising. I hate paying too much for property, and with Land Securities trading on a price-to-earnings ratio of 18.8 times earnings, I feel there must be better ways to play the recovery. If we get a recovery, that is.

Bullet proof
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