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        Foreign investors eye senior housing and care market

        By Todd Balazovic | China Daily | Updated: 2012-12-01 07:59

         Foreign investors eye senior housing and care market

        An elderly woman receives a massage at her home in Beijing from a nurse from US-based company Right-At-Home Care. Liu Zhe / China Daily

        Opportunities emerge as nation's elderly population set to reach 221 million by 2015

        For years foreign investors have tried to jumpstart China's senior housing and care market. So far, none have succeeded.

        Social stigma, difficult investment boundaries and an untested market have been the pitfalls for scores of foreign players looking to tap into the business of taking care of seniors.

        But as providing quality care for a burgeoning senior population becomes increasingly problematic, foreign investors are jostling for pole position to pioneer China's senior care industry.

        With the China National Committee on Aging estimating an elderly population of 221 million by 2015, the potential for private senior healthcare businesses is obviously great.

        Leading the latest foreign foray is Cascade Healthcare Services, a joint venture backed by US-based Emeritus and Columbia Pacific Advisors, which opened its first senior care center in Shanghai in October.

        "Our conclusion is this is definitely going to be a huge market in China," said Serena Xie, managing director of Cascade Healthcare.

        Investing $5 million in remodeling an old hotel in Shanghai's Xuhui district, their 100-bed facility will cater to China's newly minted middle-class, offering full-care residency for 12,000 yuan ($1,926) to 18,900 yuan a month.

        Backed by Dan Baty, co-founder of Emeritus and a veteran of the US senior housing market, Cascade's new center is being billed as a prototype in the untested senior healthcare market in a city where residents over 60 account for almost 25 percent of the population.

        For Cascade, it is the start of an ambitious plan to open dozens of centers across the country, with plans for another center in Shanghai next year, as well as a $6.75 million joint-venture with Sino-Ocean Land in Beijing.

        Cascade is racing to become the first big foreign company to succeed in the sector. But while Cascade may be the first foreign-funded assisted-living center in Shanghai, it is not the first foreign company in China with hopes of establishing a foothold in senior care market.

        "There were a small number of attempts to open the Chinese senior care market in the late 1990s, all of which were unsuccessful," said Ben Shobert, managing director of Rubicon Strategy Group, a Seattle-based consulting agency focusing on emerging markets. "This is commonly believed to have been because the market was not yet ready."

        As the question of how to ensure proper care for seniors becomes increasingly urgent, it seems the market is now ready for private entrants.

        Propelling the market is China's 12th Five-Year Plan (2011-15). For the first time, the nation's social and macro-economic blueprint looked at senior care and easing foreign investment restrictions in the private health sector.

        "Central and local governments have never before been so supportive on attracting private investors to the senior care industry," said Qu Qin, a lawyer with Shanghai Co-Effort Law Firm and editor of China Senior Housing and Care Newsletter.

        "The government is also planning to issue more regulations on licensing, operator/nurse qualification, elderly protection, and more preferential policies in subsidies, land supply and taxation, among others. In the past, (foreign investors) might not have been even able to find where and how to get approval for opening a facility."

        While Cascade may be among the first foreign companies in Shanghai to test the new policies for the senior health sector, it is not alone in its belief that the market is now ready.

        Fortress Investment Group, a hedge fund in New York, said it wants to invest more than $1 billion in the senior housing market in a domestic conglomerate partnership with Fosun Capital Group.

        While the money might be coming in and the regulations may be favorable, foreign investors face daunting cultural barriers.

        For hundreds of years, Chinese family tradition has put it upon children to take care of their elderly parents.

        The notion of filial piety has carried on in modern times: In 1996 the government set out a policy that required children to take care of their aged parents.

        But as more and more families opt to live in dual-income households and as the pressures put on families by the family planning policy increase, many children are now left to take care of both their parents as well as four grandparents - a concept known as the "421" family structure in China.

        "The situation is more serious due to the '421' family structure. It generates more empty-nest families who will need institutional care," Qu said.

        He said the real crunch will come after 2015, making now the optimal time for foreign businesses to enter the market.

        "The timing at present is ripe for foreign investors to enter the market and build their brand."

        Already, families are recognizing the pressure put on children and the need to adapt to China's transforming family structure.

        "With the rapid growth of China, many have changed their train of thought. People are starting to live individually, paying for their own care," said Ma Zhang, 83, a retired government official who has been using US-based Right-At-Home Care, an in-home nursing service, for more than a year.

        Speaking in a lavishly decorated two-story apartment in Beijing's Fengtai district where he lives with his 81-year-old wife, the energetic octogenarians said they began using the service to help alleviate the pressure on their two children.

        With their daughter working as an auditor in the United States and their son working for a large telecommunication company in the capital, he said it is difficult for their children to find time to visit.

        "My children are very busy, so it gets quite lonely every day," Ma said.

        The caretaker not only monitors their health and helps with housework, but converses with the elderly couple throughout the week. That seemingly mundane but necessary task was one of the driving factors for Ma and his wife.

        At 20,400 yuan a month, paying for conversation may seem extravagant, but paying for foreign senior care is also a sign of status, akin to owning a nice car.

        "We chose this brand because it is American and we knew it would be high quality. Many of our friends admire our ability to afford this kind of service."

        This positive perception of foreign brands is giving companies like Right-At-Home and Cascade a leg up when angling for middle-class families who can afford to pay for quality senior care.

        Another cultural barrier for foreign companies breaking into the market is the perception that senior assisted living can be a sign of luxury. In many cities across China, many of the current senior health facilities are funded by government and geared toward low-income families.

        "In the past 10 to 20 years almost all of the senior facilities were created by the government and geared toward people on low incomes. Because of this (assisted living) has a very bad reputation," Xie of Cascade Healthcare said.

        She said if senior care companies want to see the industry grow, they must convince the younger generation that putting their parents in assisted living is not necessarily a bad thing.

        "I think for us, making money is one thing, but more important it's that we want to make a difference here. We want to show people what it's like for seniors in developed countries to live," Xie said.

        In addition to tackling perception, there is also the reality of numbers.

        Ninety percent of seniors will either remain "aging-in-place", or living on their own or with their children, while 7 percent will live in community or government housing geared for those on a low income. Three percent are in high-end private housing centers.

        This means high-end foreign healthcare providers are targeting just 5.4 million of China's 181 million elderly people, indicating that the market may not be as large as companies hope.

        But the number of the nation's retirees is skyrocketing, meaning the number of seniors looking for high quality may also grow.

        Though the need to deal with the rapidly aging population is an immediate and real concern, investment in China has changed and businesses must be cautious before leaping into unknown markets, said Shobert of Rubicon Strategy Group.

        "Now, foreign operators are very focused on a patient and disciplined approach that emphasizes market research, cautious build-outs, and careful selection of which demographic or market niche to emphasize."

        Whether or not foreign investors have waited long enough to re-invest efforts into getting a foothold in China is still unknown. For now, many are still adopting a wait-and-see attitude.

        "The question of whether the industry has the elasticity to absorb excess capacity, learn from early mistakes, and then re-deploy across China in a time frame to make for a compelling industry opportunity or to address the very real human needs this industry serves, remains to be seen," Shobert said.

        toddbalazovic@chinadaily.com.cn

        Foreign investors eye senior housing and care market

        (China Daily 12/01/2012 page10)

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