China Property Firms See New Market in Old Age Homes

October 28, 2013, 3:20 PM

China Property Firms See New Market in Old Age Homes

China’s property sector has been a reliable money-spinner even in the face of a nearly four-year government campaign to hold the line on speculation. But at least some property firms are starting to hedge their bets, taking a look at fresh opportunities from China’s aging population. A number of companies that have a lengthy track record in real estate are looking to turn their hand at property management with a twist – managing facilities that care for the elderly.Shanghai-based Sino-Ocean Land is one such company. It recently teamed up with the healthcare arm of Columbia Pacific of the U.S. to build and manage a 110-bed facility in Beijing called  Senior Living L’Amore Kaijian.

Columbia Pacific’s Cascade unit had also joined forces with Shanghai Shengyuan Development Co. for a facility in the east coast city’s Xuhui district and it is planning another one with the same local partner in the city’s Pudong area.

“China’s population is aging very quickly, so there is going to be a huge market and lots of opportunities for investors and operators,” said Serena Xie, who runs the company’s facility  in Shanghai’s Xuhui district.

“But it’s going to take a long time with much effort from the government and the private sector.”

China has nearly 200 million people over 60 years of age and will have 300 million by 2030. That will rise to more than 485 million by 2050 – approaching the entire current population of the 28-nation European Union today.

“We are an aging society and the need for services for the elderly is rising,” said Wu Yusha, head of the China National Committee on Aging.

“The financial burden is very heavy.”

That’s why China is keen to bring in the private sector.

Last month, the State Council, or cabinet, announced a new policy to encourage private participation in care for the elderly, reducing taxes and offering subsidies for personnel training.

Authorities will waive the business tax on maintenance at facilities for the elderly and scrap the enterprise income tax on some not-for-profit facilities.

At least 50% of welfare lottery proceeds of the Ministry of Civil Affairs and local governments should be spent on supporting the industry, the cabinet said without giving further details.

It also said it would expand the types of collateral that could be used to get bank loans to help expand services in the sector.

Other property firms have taken note of the government policy — and they can do the math.

“We think this is a very big market,” said Chen Yaozhong, president of Changcheng Property in Shenzhen.

“We already manage property. We have operations in 30 small and medium cities and some 60 million square meters of residential housing under management,” said Mr. Chen. “We take care of properties with some 600,000 residents.”

That  doesn’t exactly make them experts in healthcare.

Mr. Chen says he is aware of the different demands and is keen to find partners who can help. He adds that the company is running a senior care facility in Shenzhen and says it has brought in the Hong Kong Society for Rehabilitation, a non-government organization that has a wide range of social welfare services, as a consultant. The society confirmed its participation.

“We want to cooperate with specialized international agencies,” he said. “We need to work with a partner that has experience in this area.”

There are also some specialized needs as well. Among the elderly, there are some eight to 10 million people with some form of dementia, according to official estimates. As the senior population expands, those numbers will too.

Mr. Chen said Changcheng is also looking at providing home care. The company is talking to U.S.-based specialist Home Instead Senior Care for some form of cooperation, though so far no deal has yet been completed.

Meanwhile, some of the China property market’s real-estate heavyweights are also looking at senior care.

China Vanke Co., the nation’s biggest property company by revenue, already has a senior living project in Hangzhou with 575 rooms for its residents, part of an effort to test the waters. The facility has adapted to slightly different requirements, putting in wider elevators and corridors and emergency help buttons and lights, according to company officials.

Vanke is also looking for partners with experience in the field, though company officials add they are still seeking the right business model.

Prices for senior care vary markedly. Many old age centers charge just a few hundred yuan per month and state subsidies may be a key component in making this a success. There are also high-end  facilities where care can cost as much as 15,000 yuan (nearly $2,500) a month, depending  on how much attention is needed.

Not everyone is convinced that there is solid demand at the high end of this market – and it isn’t clear whether children will spend on their parents the same way they lavish money on their children.

“There is a lot of hype regarding the current market for high-end senior care,” said Bromme Cole, president of senior living consultancy Hampton Hoerter China. “Those who are more than 70 years old grew up in tough times and find it an absurd idea to spend 15,000 yuan a month to live away from their families.”

Others voice similar concerns.

“Seniors who are in their 80s in China don’t have that much money,” said Ms. Xie, of the venture with Columbia Pacific. “People in their 40s and 50s have no qualms about paying 10,000 to 20,000 yuan for a three-day camp for their children, but might think twice about spending that kind of money on their parents.”

Property firms may not have the right business formula just yet, but it’s clear that some companies see new business in an older population.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: