The old adage of healthcare being a recession-proof sector has helped the ING Medical Properties Trust increase its half-year operating profit by 15.3%.

The trust today announced an unaudited interim operating profit before tax of $6.76 million for the six months to December 31 last year, up from $5.87 million in the same period in 2008.

The increase was mainly a result of a 4.9% increase in rental income to $12.36m and reduced interest rate expense due to lower rates.

ING Medical Properties general manager David Carr said the trust produced a 12-month return to investors of 18.5% compared to the NZX Gross Property Index that had a return of 12.9% according to Forsyth Barr research.

He said large parts of the commercial property sector are now facing the impact of the “lag effect” of the global financial crisis, with increasing vacancy levels and downward pressure on rents.

However, he said that “due to the underlying demographics supporting medical and healthcare sector growth trends,” ING Medical hasn’t experienced this lag effect.

In fact, portfolio occupancy levels for the trust have increased by over 2.5% from a year ago, with occupancy now at 99%.

But while the company appears in good health there is a potential speed bump ahead- the prospect of the government changing the rules for property tax.

ING Medical Properties chairman Bill Thurston said that while he was relieved that the government’s proposed tax reforms announced last week would not include land tax and capital gains tax, the potential for the removal of building depreciation remained a concern.

He noted that the impact on the trust of eliminating depreciation would be limited by the fact it had about one third of its portfolio in Australia.

But he added, “This is not just about the impact on the trust specifically but the likely negative effect it will have on the trust’s tenants, and the thousands of Kiwi mum and dad and institutional investors we have.

“Of real concern also is the further isolation of New Zealand from the already highly competitive global markets for offshore capital and business investment, which is essential in supporting economic growth in New Zealand.”

Mr Thurston also said denying depreciation on medical and healthcare property assets would impact on all private sector investment in healthcare in New Zealand and increased margins would be passed on to healthcare patients and clients.

ING Medical Property shares (NZX) are currently sitting at $1.16 with a 52-week high of $1.23 and a 52-week low of $1.10.