Chinese investment in U.S. senior housing did not just stall in 2018, it came to a dead stop. However, Chinese investors continue to hold onto their senior housing assets in this country for the time being.
There were no Chinese acquisitions of U.S. senior housing and care assets last year, according to real estate data and analytics firm Real Capital Analytics (RCA). That is a startling contrast to past years, when China accounted for over $1.4 billion in U.S. senior housing and care deal volume from 2015 to 2017.Courtesy of Real Capital Analytics This graph shows investment in U.S. Senior Housing by China (in blue) and Hong Kong (in orange) from 2013 to 2018.
That rush of activity was spurred by blockbuster deals such as Toledo, Ohio-based Welltower’s (NYSE: WELL) sale of a 75% stake — valued at $930 million — in a portfolio of Brookdale Senior Living (NYSE: BKD) and Genesis HealthCare (NYSE: GEN) buildings to Chinese companies Union Life Insurance and Cindat Capital Management.
The investment slowdown began after Q1 2017, when Chinese acquisitions accounted for nearly $625 million in deal volume, and coincided with reports of Chinese government pressure to stem the flow of outbound capital into U.S. commercial real estate.
The pressure from Beijing on Chinese sovereign wealth funds may be somewhat warranted. Two of the highest-profile buyers, Anbang Insurance and HNA Group, have become sellers in the past year, amid reports the companies are strapped for cash. Chinese dispositions of U.S. real estate outpaced acquisitions in Q2 2018, reversing a 10-year trend, and Chinese companies sold $1.05 billion in U.S. real estate the following quarter.
Unlike their peers in other real estate asset classes, Chinese investors are holding on to their senior housing acquisitions in order to study design and operational best practices, Cambridge Realty Capital CEO and chairman Jeffrey Davis told SHN. Chicago-based Cambridge specializes in senior housing and health care financing.
Cambridge hosted a summit for Chinese investors five years ago where Davis learned their primary interest was studying U.S. senior housing for ways to house an elderly population expected to reach 300 million people over the next 15 years. An inadequate amount of supply and the effects of China’s “one-child” policy on family planning, are also contributing factors in this interest in U.S. senior housing
“It makes sense because their population is so large,” Davis said. “They’re looking at different ways to house a growing population.”
One of the lessons Chinese investors are bringing back to the mainland involves building dense, sprawling campuses with a range of care acuities.
Taikang Community Yue Garden in Guangzhou, Guangdong, China — the 2018 Senior Housing News Architecture and Design Award winner for Best International Design — is an example of this. U.S.-based architecture and design firm Steinberg Hart has designed over 10.6 million square feet of Chinese senior housing since 2010.
And while Chinese investment has dried up, there is still plenty of equity targeting the U.S. senior housing space — including foreign capital. In recent months, Singapore-based conglomerate Keppel invested in Watermark, and Welltower secured a $300 million investment from an affiliate of Qatar Investment Authority (QIA), which also has an option to acquire an interest in a development pipeline of urban senior living communities.
Always inquisitive and often curmudgeonly, Chuck can often be found on a bike unlocking Chicago's secrets, telling stories, making cocktails, checking out live music, tearing through his podcast and Filmstruck queues and playing with his pitbull, Mira.