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

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 (cont’d)
• MCS
• Secom
• Vcanland
• Union Life

5. China –The Year in Review
• Experienced Operators (cont’d)
• Departures
• CRSA
• Origen
• Domestic projects
• General’s 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