ING Medical investors demand answers

David Carr speaks to investors. Photo / Martin Sykes

Investors in a $286.2 million listed medical property business demanded information yesterday about a takeover by ANZ, management fees and a new structure.

ING Medical Properties Trust held its annual meeting in Auckland yesterday and investors criticised its structure, board composition and the amount of money flowing to its manager.

They also sought answers about the impact of ANZ's takeover of ING NZ.

ANZ announced last month that it would pay $2.1 billion to take over its Australasian joint venture with Dutch financial services giant ING.

Unitholder John Wilson asked about the trust's cost of borrowing and noted that ANZ was the trust's banker. ANZ has extended a $135 million facility due to expire in March, 2011.

Bill Thurston, chairman of the trust's manager, said that at the time the ANZ facility was arranged, market conditions were different. The business had sought the best possible deal available in the market at the time the loan was negotiated, he said.

Noel Thompson, secretary of the Shareholders' Association, asked why the board had only two independent directors - Thurston and Graeme Horsley - yet two ING-appointed directors, Andy Evans and Peter Brook. Thompson said he wanted the board to have a majority of independent directors to ensure unitholder interests were fairly represented.

But Thurston said ANZ's takeover left some matters up in the air and this included whether Evans and Brook would even continue. Their status was "unsure", he said.

Another unitholder criticised the situation where the trust's manager was about to go through yet another ownership change which would bring more rebranding. Investors had remained tolerant while enduring two management ownership changes this decade - first under Calan, then under ING. The investor wanted to know if unitholders would have to foot the bill for another change in brand.

Another unitholder demanded to know why distributions were forecast to remain static at 8.5 cents/unit in the current year yet the trust's manager had enjoyed a big fee rise which included payment of a separate $253,000 incentive fee.

Fees paid to the manager were listed in the annual report as $2.7 million in the year to June 30, 2009.

Thurston also acknowledged the point about fees but predicted that no incentive fee would be paid to the manager in the current financial year.

Investors asked about the prospects of a new structure so the interests of the manager and the investors were merged. A vehicle the size of the trust would gain from such a change, one unitholder said.

Thurston said the board was watching development of this business model in Australia closely and he did not rule out a big shake-up.

"Internalisation is the new buzzword and we talked about it at the board meeting this morning and we're watching it with interest," he said.

David Carr, general manager of the trust's manager, said the property market had become "opportunistic" and Thurston did not rule out the trust looking at buying more real estate.

Carr said the trust was conservatively geared and in the past few weeks had pushed up its occupancy levels to 98.4 per cent. Its lease expiry profile was the sector's best, standing at nine years compared with National Property Trust's 3.1 years and ING Property Trust's 4.2 years.

Thurston said the trust's unit price had risen in the past year from $1.09 to $1.21 and unitholders had enjoyed a total return (cash distributions combined with unit price performance) of 19.1 per cent in the year to June 30. The NZX gross property index return was -18.6 per cent, he said.

The trust was yesterday steady at $1.18 on the NZX.

CHECKING THE PULSE

ING Medical Properties Trust's 14 properties include:
* Ascot Hospital & Clinics, Auckland - $82 million
* Epworth Eastern Hospital, Melbourne - $63.6 million
* Apollo Health & Wellness, Auckland - $22.1 million