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RCWA Presentation 10-17-12

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Joseph Christian's keynote presentation in Hong Kong for the October 2012 Terrapin Retirement Communities World Asia conference.

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Retirement Communities World Asia - 2012 Joseph J. Christian Asia Fellow Harvard Kennedy School Ash Center for Democratic Governance and Innovation
China - The Year in Review Major Themes last October: Importing experienced operators Uncertain regulatory environment Starting at high end of market Shortage of skilled healthcare workers
China The Year in Review Importing Experienced Operators Growing realization that senior housing is not a real estate play Cascade/Emeritus in Shanghai Belmont Village on Chongming Island China Senior Care in Hangzhou Waterbrook
China The Year in Review Experienced Operators (contd) MCS Secom Vcanland Union Life
China The Year in Review Experienced Operators (contd) Departures CRSA Origen Domestic projects Generals Garden Yanda Cherish Yearn
China The Year in Review Regulatory Uncertainty Central government Local governments
China The Year in Review High End of Market Foreign operators still focused on high end Most view high end healthcare as essential part of developments Middle income market will be much larger Need government to provide support
China The Year in Review Shortage of Healthcare Workers 90/7/3 Home healthcare business
China - Trends Government Support Policy changes being considered at central and local government levels Designate land for senior housing Require senior housing as infrastructure Preferential land pricing or subsidies No auction for land to be used as senior housing Preferential utility rates, tax rates
China - Trends Financial support Reverse mortgages Pensions Long-term care insurance Health insurance
China - Trends Insurance companies Can invest up to 20% of total assets in real estate Encouraged by central government to invest in senior housing Good assets-to-liabilities match Retirees a pool of potential customers Domestic developers
Japan Maturing market Long-term care insurance in 2000 US$700mm in FDI in sector Announced commission to establish first healthcare REIT Highly fragmented Over 4,000 operators Dominated by top 10%
U.S. As of the fourth quarter of 2011: 22,000 senior housing properties 4,000 independent living 7,000 assisted living 11,000 nursing care 2,900,000 units 860,000 independent living 520,000 assisted living 1,520,000 nursing care
U.S. Aggregate market value of senior housing and care market = $260 billion Acceptance of product type in debt and equity markets, but not as wide as other property types Cap rates 300 to 400 basis points above apartments Less liquid market Spreads moving lower senior housing did well in financial crisis
Conclusions Progress made in China over the last year, but still proceeding with caution Business models not proven Long start-up period to build organization Will be failures along the way
Thank you Joseph J. Christian joseph_christian@hks.harvard.edu joseph.christian@gmail.com

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RCWA Presentation 10-17-12

  • 1. Retirement Communities World Asia - 2012 Joseph J. Christian Asia Fellow Harvard Kennedy School Ash Center for Democratic Governance and Innovation
  • 2. China - The Year in Review Major Themes last October: Importing experienced operators Uncertain regulatory environment Starting at high end of market Shortage of skilled healthcare workers
  • 3. China The Year in Review Importing Experienced Operators Growing realization that senior housing is not a real estate play Cascade/Emeritus in Shanghai Belmont Village on Chongming Island China Senior Care in Hangzhou Waterbrook
  • 4. China The Year in Review Experienced Operators (contd) MCS Secom Vcanland Union Life
  • 5. China The Year in Review Experienced Operators (contd) Departures CRSA Origen Domestic projects Generals Garden Yanda Cherish Yearn
  • 6. China The Year in Review Regulatory Uncertainty Central government Local governments
  • 7. China The Year in Review High End of Market Foreign operators still focused on high end Most view high end healthcare as essential part of developments Middle income market will be much larger Need government to provide support
  • 8. China The Year in Review Shortage of Healthcare Workers 90/7/3 Home healthcare business
  • 9. China - Trends Government Support Policy changes being considered at central and local government levels Designate land for senior housing Require senior housing as infrastructure Preferential land pricing or subsidies No auction for land to be used as senior housing Preferential utility rates, tax rates
  • 10. China - Trends Financial support Reverse mortgages Pensions Long-term care insurance Health insurance
  • 11. China - Trends Insurance companies Can invest up to 20% of total assets in real estate Encouraged by central government to invest in senior housing Good assets-to-liabilities match Retirees a pool of potential customers Domestic developers
  • 12. Japan Maturing market Long-term care insurance in 2000 US$700mm in FDI in sector Announced commission to establish first healthcare REIT Highly fragmented Over 4,000 operators Dominated by top 10%
  • 13. U.S. As of the fourth quarter of 2011: 22,000 senior housing properties 4,000 independent living 7,000 assisted living 11,000 nursing care 2,900,000 units 860,000 independent living 520,000 assisted living 1,520,000 nursing care
  • 14. U.S. Aggregate market value of senior housing and care market = $260 billion Acceptance of product type in debt and equity markets, but not as wide as other property types Cap rates 300 to 400 basis points above apartments Less liquid market Spreads moving lower senior housing did well in financial crisis
  • 15. Conclusions Progress made in China over the last year, but still proceeding with caution Business models not proven Long start-up period to build organization Will be failures along the way
  • 16. Thank you Joseph J. Christian joseph_christian@hks.harvard.edu joseph.christian@gmail.com