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ING Medical takes swipe at proposed tax tweaks

Wednesday 17th February 2010

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ING Medical Properties Trust took a swipe at the government’s proposal to eliminate tax write-offs for depreciating buildings.

It posted a 15% gain in first-half underlying earnings today.  The company managed by ING Medical Properties increased its operating profit, the favoured measure of property trusts as it excludes unrealised movements in assets and liabilities, to $6.76 million in the six months ended December 31 from $5.87 million a year earlier.

Including changes to the value of property and financial instruments, the firm had a net profit of $6.49 million, or 4.77 cents a share, from a loss of $7.04 million, or 2.01 cents a share, in 2008.  

Bill Thurston, the manager’s chairman, said the threat of building depreciation being removed was a concern, though he was relieved to the government wouldn’t take up recommendations of the Tax Working Group for a land tax or capital gains tax.  

“This is not just about the impact on the trust specifically, but the likely negative effect it will have on the trust’s tenants,” Thurston said.

“Of real concern also is the further isolation of New Zealand from the already highly competitive global markets for offshore capital and business investment.” 

Thurston said the trust’s exposure to any extra tax burden was softened by having a third of its property portfolio in Australia.  

Earlier this month Anthony Beverly, head of property at AMP Capital Investors, said wiping tax breaks on depreciation would effectively increase the corporate tax rate and create disincentives for foreign investment.  

ING Medical’s shares rose 0.9% to $1.17 in trading today, and have declined 2.5% this year.  

The property investor lifted its property income 6.3% to $12 million, and raised its earnings before interest, taxation, depreciation and amortisation by 8.4% to $10.52 million. While revenue was in line with Forsyth Barr analyst Jeremy Simpson’s forecast, the EBITDA result came out better than his $9.8 million projection.  

The trust announced a second-quarter distribution payment of 2.125 cents in cash and 0.2394 imputations credits, and the board reaffirmed its guidance of a distribution of between 8.4 cents and 8.6 cents a unit.

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