IMP 2010 preliminary revaluation result, tax

IMP 2010 preliminary revaluation result and deferred tax Impact

The Board of ING Medical Properties Limited (“IMPL”), the manager of ING Medical Properties Trust (the “Trust”), today announced the preliminary results of the Trust’s independent annual property revaluations.

The Trust’s property portfolio value has increased by 3.6% or $10.2m over the 12 months to 30 June 2010. The independent valuations remain subject to confirmation as part of the Trust’s 30 June 2010 year end external audit.

David Carr, General Manager of IMPL said “the result reflects the relatively stable period of underlying sector fundamentals, which have been key to the overall enhancement of many of the Trust’s core portfolio and property metrics over the last 12 months and in turn resulted in enhanced overall asset values. Additionally it now appears that the softening of market capitalisation rates has slowed and in some instances stabilised for certain asset classes”.

The independent property valuations were completed by Darroch, Colliers International and CB Richard Ellis as at 30 June 2010 and show the aggregate value of the Trust’s portfolio at $292.0m. The apportionment between the New Zealand and Australian properties is $184.8m and $107.2m respectively. This excludes the recently announced unconditional sale of the Waipukurau property which is yet to settle.

Carr said “The Trust’s portfolio now reflects a weighted average capitalisation rate of 8.7%, which is marginally firmer than 12 months prior reflecting the stronger portfolio metrics, including occupancy now at 99.6%, high lease renewal rates, and continued CPI-linked rental growth. As at 30 June 2010 the Trust’s portfolio is 2.0% under-rented.

Based on the unaudited preliminary results, the Trust’s debt-to-total-assets ratio is forecast to reduce from 34.17% to 32.98%.

Effect of tax changes – deferred tax The New Zealand Government Budget announced, amongst other things, changes in the allowance for depreciation in respect of building structures for tax purposes with effect from the commencement of the 2011 income tax year.

Stuart Harrison, Chief Financial Officer of the Manager said “for the Trust this will come into effect as from 1 July 2011 and will only relate to the New Zealand based building assets, further emphasising the Trust’s diversification with approximately 35% of its assets in Australia, which will not be subject to the change. A consequence of the announcement has been a triggering of a deferred tax adjustment that will be required to be made in order to comply with International Financial Reporting Standards or IFRS. This will be a one-off adjustment which will increase the deferred tax liability relating to the removal of depreciation of building structures”.

Mr Harrison said “this is a non-cash adjustment and will not impact the distributions available to unitholders under the terms of the Trust Deed nor will the liability created be required to be paid to the Inland Revenue Department. Because the announcement was made prior to the Trust’s financial year end of 30 June 2010 the deferred tax adjustment will need to be recognised within the year end results and will have the impact of increasing the deferred tax liability by approximately $26.2m on the Balance Sheet with a corresponding increase in the deferred tax expense shown in the profit and loss”.

Net tangible asset backing The Trust’s preliminary revaluation and the effect of the tax changes will have an impact in adjusting the net tangible asset backing (NTA) as detailed below, noting that the 30 June 2009 financial results reported an NTA of $1.17 (which excludes an allowance for deferred tax on revaluation gains).

On a like for like basis where normally there would only be movement reflecting the operating performance, distributions made and revaluation impacts, this would have resulted in an unaudited NTA of $1.24 as at 30 June 2010, which includes 2010 revaluations but again excludes an allowance for deferred tax on revaluation gains.

However as noted above with the New Zealand Government Budget changes made and the Balance Sheet now reflecting the required deferred tax adjustment, this results in an unaudited NTA of $0.98 as at 30 June 2010, which includes revaluations and the budgeted deferred tax adjustment.

The valuations will be confirmed as part of the Trust’s overall year end audited financial results which will be announced late August 2010.

ENDS

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