ING Property Trust, one of the country's largest listed landlords, has a $500 million debt burden hovering over it and one investment analyst is worried.

Stephen Ridgewell, of Macquarie Research Equities in Auckland, has raised concerns about the trust's borrowings. He wrote a report outlining many issues and saying the trust's rating had been downgraded from neutral to underperform.

The trust had 95 buildings valued at just over $1 billion, putting it among the top listed real estate investment vehicles.

But Ridgewell is particularly worried about the climate for borrowing and questioned the trust's decision to make a big unit-holder payout, announced last week.

"Refinancing its $500 million bank facility with ANZ, which is due to expire in September 2010, will hang over ING like the sword of Damocles for the next 16 months," Ridgewell wrote in a report issued after the trust's annual result.

"Unfortunately for ING, the bank funding market for New Zealand real estate investment trusts has continued to deteriorate over the past two to three months."

Ridgewell said he had a better view of the trust's future in March but he had since changed his mind.

"We now downgrade our recommendation for two reasons: first, ING is now the only New Zealand listed real estate trust to still have near-term refinancing risk. Further deterioration in the bank funding market since our last update will require ING to de-leverage more than we had previously anticipated.

"Second, we are disappointed and concerned management has not cut its distribution to a more sustainable level, particularly given low interest coverage and near-term refinancing risk," Ridgewell wrote.

Last week, ING announced a $63.1 million after-tax loss for the year to March 31 and said it would pay its unit-holders less in future.

Mike Smith, chairman of the trust's manager, announced a distribution of 8c per unit, down on the previous year's 8.4c/u.

Last year, the trust made a $71.7 million profit, but Smith said the trust's properties had been devalued by $89.9 million compared to valuation gains of $43 million last year.

Peter Mence, general manager of ING Property Trust Management, said the trust's results were well received by institutional and retail investors and most property analysts.

"The unit price has responded favourably, which is particularly pleasing in light of other parties' capital raising initiatives currently in the market. Since the annual release, our unit price has increased from 56 cents," he said.

He is also relaxed about borrowings, saying the $500 million has a further 16 months to run of a 36-month term.

"Currently the trust has only drawn $410 million of this facility. If the trust was to add 20 months to the term of the facility - so that it reverts to a 36 month term - the margin and line fee charged by the lender would immediately increase. Open dialogue is maintained with the lender and the renegotiation of the facility will occur in due course.

"We are confident that through the successful asset sales programme we have demonstrated an ability to manage the trust's capital position without the necessity for a deeply discounted capital raising.

Coverage of the trust by analysts Jason Lindsay, of First NZ Capital, and Jeremy Simpson, of Forsyth Barr, presented a more balanced view, Mence said. Simpson has a 'hold' recommendation on the trust's units.

"ING has a large, diversified portfolio of assets and while it continues to successfully divest smaller assets to reduce debt, it remains one of the highest-geared listed property vehicles, and our recommendation remains hold," Simpson wrote.

"ING's strength is its diversification and the liquidity that its large portfolio of relatively small properties provides via asset sales at a time of tight credit markets.

"ING remains with relatively high gearing and it is the next major listed property vehicle to face a banking rollover with a renewal date of September 2010."

Simpson wrote: "Risks around ING successfully rolling over the facility and the level of bank fees ... are key uncertainties for investors."

TRYING TIMESING

Property Trust:

* Owns property worth $1.1 billion.
* Has about 300 tenants and 95 buildings.
* Average weighted lease term 4.2 years.
* Retail, industrial and commercial buildings.
* Has been selling assets to reduce debt.