3. CHINA’SSENIORHOUSINGSECTOR
Predicting the Market’s Evolution
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2015-2020 2020-2025 2025-2030 2030-2040
HHC
• HHC is the first
place payer
systems will
focus.
• Natural
development
path given
regional labor
force.
• Trials w/
community care
take shape.
• Concept of
“virtual CCRC”
begins to be
trialed.
• Public payer
system funds
nursing services
for high flyers /
bed blockers.
• Early scaling of
LTC financial
vehicles.
• Technology
starts to
address
workforce
utilization
issues.
• Mature public
and private
payer system
has emerged.
• Various
stakeholders
understand, and
freely use HHC.
• Infusions and
hospice in-
home care.
IL/AL/SN
Regionally, “Baby
Boomers” hit 75.
Rehab
Point of
diminishing
returns on rehab
services.
MC
Dementia
services start to
become needed
en-masse relative
to installed
capacity.
4. PART 2 – KEY FINDINGS FROM RUBICON’S MARKET ANALYSIS
5. CHINA’SSENIORHOUSINGSECTOR
Key Findings
• Real estate developers view senior living as another way to keep doing
what they’ve been doing for 20+ years.
• Party cadre mentality at the municipal government level is driving a lot
of movement around approvals of domestic and foreign senior living.
• Exception is around healthcare-specific (medical service) assets, which
remain subject to uncertain approval periods.
• Life insurance companies view senior living as something they are
invested in long term:
• They will develop new LTC vehicles.
• Provide care as stipulated in these LTC products via senior care
facilities they own and operate.
• They will use existing balance sheet resources to invest in senior
living real estate assets (CCRCs).
• Real estate remains the easiest investment channel for them and
a pressing need given their investment mandate.
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6. CHINA’SSENIORHOUSINGSECTOR
Key Findings
• Profit is elusive.
• At least one of the largest American senior living operators has
dramatically scaled back their senior living plans in favor of more
direct healthcare opportunities.
• Growth in appraised value of developed land lubricates much of the
positive view of senior living assets thus far.
• HNWI market is much narrower than many originally assumed; products
will need to be developed that allow for price points accessible to the
middle class.
• Aging in place and home healthcare remain significant opportunities
assuming questions specific to client acquisition costs, logistics and
rationalized spending behaviors can be addressed.
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7. CHINA’SSENIORHOUSINGSECTOR
Understanding the Senior Living Preferences for Chinese HNWI
The preference of senior living
of HNWIs and their parents
Facility Based Senior Care
• Preference for facility based senior living is
less than 5%.
This is Changing
• Today’s HNW cohort has a much higher
(87.5% higher) preference for senior
community than their parents.
9. CHINA’SSENIORHOUSINGSECTOR
Important to Reinforce
• Less than 11% of HNWIs in China mention senior care services as a
spending priority.
• Preference for facility-based senior care (versus respite or home
healthcare) is less than 5%.
• This is changing: the next generation of HNWIs have a strong lifestyle
preference for senior living (88% higher than their parents’ preference).
• People do not want to move away from their home city full time.
• 67% want to stay in their home city.
• 39% want to move to an “excellent tourism city.”
• Only 27% are willing to move from a T1 to T2 city.
• HNWIs have a very strong bias in favor of senior living that is integrated
with a full continuum of care.
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10. CHINA’SSENIORHOUSINGSECTOR
Demographics & Site Selection – What Are We Looking For?
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Typically, with an intra-city re-
development feasibility study, we
are looking at grid level (1 square
km). We want to identify the
highest concentration of 65+ and
then drill down via a market
segmentation exercise, to the
number of income qualified people
within a fixed radius from the facility
in question. This tends to be 3-5km
for most projects in T1 and T2 cities.
11. CHINA’SSENIORHOUSINGSECTOR
Example: Regional Demographics - Nanjing
11
A typical re-development driven feasibility study would zero in on a project located in an urban area
with a high density of 65+ and middle class. In Nanjing, a good example would be Molingjiedao, with
a population of 16,818 aged 65 and older. This is important because at typical market penetration rates,
that district would have between 15 and 757 potential customers.
12. CHINA’SSENIORHOUSINGSECTOR
Regional Demographics – Nanjing – Market Segmentation
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Nanjing Hefei Huai’an Taizhou Wuhu Changzhou Xuancheng Xuyi
65+ Market
Size
689,350 482,595 498,689 657,330 243,612 448,577 289,749 70,953
% Market @
Middle Class
Income
9% of urban
population
43,434 44,882 59,160 21,925 40,372 26,077 6,386
1%
Penetration
662 434 449 592 219 404 261 64
3%
Penetration
1,985 1,303 1,346 1,775 658 1,211 782 192
5%
Penetration
3,308 2,172 2,244 2,958 1,096 2,019 1,304 319
What does this mean as you think about your sales & marketing strategy?
15. CHINA’SSENIORHOUSINGSECTOR
Regulatory Analysis
Some helpful guidelines:
• Senior care is more open to FDI than healthcare.
• Broad disconnects between central and municipal governments persist.
• Pervasive ambiguities between senior care and healthcare.
• Senior care and healthcare are politically sensitive areas; however,
• Central and municipal governments want and need FDI in both areas.
• Binding healthcare regulations can be nebulous.
• Where they are, the business license’s scope is determinative.
• This scope will be negotiated word-by-word w/ relevant authorities.
• A business’ scope creates hard lines around what can, and cannot be done
by the business.
• Where regulations are poorly defined, officials make decisions based on
what other municipalities have approved, pilot projects, MOH policy papers,
and non-binding guidance documents.
• It is extremely common for ad-hoc business scopes to be the result, with
specific services carving out breathing room for the company.
18. CHINA’SSENIORHOUSINGSECTOR
What Is Working, What Is Not?
• Price point between RMB 5-10,000/month.
• High acuity care for middle class RMB 10-15,000/month.
• The financial calculus of Chinese seniors around selling their current
home to finance the move into a dedicated senior living asset is
immature and may not happen at a meaningful velocity.
• Solutions that do not require dislocation within their home city.
• This creates a very strong market preference for re-purposed
facilities within an established community versus greenfield projects
in the suburbs.
• Market for successful senior care facilities is 3-5km from the
proposed site (this follows from the US – senior living here typically
sets a max radius of 5 miles).
• Healthcare access is a key driver.
• On-site doctors, nurses and caregivers.
• On-site pharmaceutical distribution.
• Green-channel referral relationship to local hospital.
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19. CHINA’SSENIORHOUSINGSECTOR
What Is Working, What Is Not?
• Rethinking what is meant by the “trans-generational housing model.”
• Proximity to, versus living w/, parents & grandparents.
• Dual key concept.
• Integration into planned community with distinct living spaces.
• Even at the best in class Chinese-run senior living assets, service remains inadequate
when measured to similarly positioned western assets.
• Worst case: senior living as a real estate play leads to inadequate emphasis
on the operational side of senior living.
• Typical case: care needs are driven by symptoms not assessment or care
plans.
• Best case: Customer service is spotty and amenities are available but not
managed.
• Significant investment in marketing.
• Traditional real estate sales and marketing is of limited use.
• Seniors and their families need lots of help understanding what senior living
is as a concept and how it will benefit them.
• Platform investments that echo the infrastructure of China’s budget hotels.
• IT systems.
• Training platform.
• Management dashboards.
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20. CHINA’SSENIORHOUSINGSECTOR
What is Working, What is Not?
• Re-development versus greenfield.
• Hub and spoke model focused on centralized post-acute services,
community care, day care, activity center, gymnasium, palliative /
hospice care, memory care.
• Hub has “green channel” referral relationship with large local public
hospital.
• Spokes connected to 200-300 unit re-purposed hotels or apartment
buildings that serve couples.
• Couples typically present when one needs AL services, and one is still
fully ambulatory.
• Real versus perceived healthcare capabilities.
• Many of the “successful” Chinese real estate developer projects have
gone out of their way to advertise their AL/SN/MC capabilities.
• Very few have the operational ability to deliver these.
• Given the average age at move-in of their current residents (78), this
is going to quickly become a problem.
• This is why most Chinese players have inquiries into western senior
living operators as partners to provide the know-how around these
areas.
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21. CHINA’SSENIORHOUSINGSECTOR
A Chinese Vision of the Western CCRC Model
Residential Real Estate Development
Retirement Village / CCRC / Senior Housing
IL Units AL/SN/MC
Units
Community
Care Center
HospiceUnits
HHC
Hospital
Lookingfora70/30–80/20mix
intermsofserviceutilizationby
thosew/inversusw/othedevelopment.
21
22. QUESTIONS?
China Office:
15/F, Office Building A,
Parkview Green
9 Dongdaqiao Road
Chaoyang District,
Beijing 100020 P.R. China
Phone: 86-10-5730-6216
Fax: 86-10-5730-6222
22
For more information:
Rubicon Strategy Group, LLC
2018 156th Avenue NE,
Suite 100, Building F
Bellevue, WA 98007
Phone: 1-888-610-7138
Email: info@rubiconstrategygroup.com
www.RubiconStrategyGroup.com
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