Developers Find Inroads into Pent Up China Senior Housing Market

Senior housing developers have tried to break into the Asian market, but with little success as regulations and cultural barriers often hampered foreign groups’ entry and progress. With demand and need growing, that’s starting to change.

In recent months, the regulatory environment has loosened in China as the government tries to prepare for the impending senior boom, and it’s allowed some foreign entities to make progress in developing the country’s nascent senior living scene.

The scope of China’s senior care market vastly eclipses that of the United States, but its preparation in terms of long-term care settings is far behind.

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The U.S. senior population is projected to reach 88.5 million by that time, comprising 20% of national population, according to U.S. Census data.

In comparison, China’s senior population is projected to jump from 185 million to 487 million by 2053, according to the China National Committee on Aging, when the elderly will account for 35% of the country’s total population.

Beijing’s senior population more than doubled in the past decade alone to 2.5 million, but the city’s government-funded care home can only provide about 28 beds for every 1,000 seniors.

The lack of residential care facilities in China was one thing Mark Spitalnik, the American CEO of China Senior Care, noticed during his 15 years in the country.

His group has spent substantial time in China and has recently been able to make inroads into the market with the development of Cypress Garden, a 64-bed residential living facility.

Located in Hangzhou—the largest city of Zhejiang Province in Eastern China—Cypress Garden is currently under development, with an expected Spring 2014 opening.

The facility will contain eight households, each housing eight residents, and will include amenities such as private kitchens on each floor along with a movie theater, exercise area, beauty salon and common areas for group activities.

With a little more than $19 million raised in capital for the facility, the Cypress project is unique not only for its far east location, says Spitalnik, but the umbrella of services available to residents under one roof.

“We are providing what would be considered in the U.S. as a continuum from low-acuity assisted living through skilled nursing,” he says.

An attorney by training, Spitalnik had been involved with healthcare in China since 1998. While evaluating the country’s healthcare market in 2006-2007, he found that most of the China’s tertiary hospitals had full geriatric wards with waiting lists.

“Most people in those wards didn’t have any acute condition that required them to be hospitalized,” says Spitalnik. “They needed a residential solution to chronic problems related to aging.”

Roughly 95% of patients did not require hospitalization, Spitalnik realized, but many were in these settings because there was not an adequate supply of quality residential age-care products.

“They were using hospital beds for a purpose that wasn’t proper,” he says. “Beds should be for acute patients, but they were using them as in-hospital nursing homes instead.”

That was all the motivation Spitalnik needed to start Delaware-based China Senior Care.

Unless it is a continuing care retirement community (CCRC)—which provides residents independent housing to assisted living to around-the-clock nursing care—regulatory issues in the U.S. prevent senior living facilities to encompass a broad array of care services within the same space.

“Regulatory hurdles are much less significant than they would be for a major city in the U.S.,” says Spitalnik. “On top of that, the Chinese government has been very supportive because they have seen a big demographic challenge as to how to take care of the growing senior population.”

In partnership with Global Senior Living Properties (GSL), China Senior Care’s goal is to develop senior care communities throughout China, beginning with Cypress Garden.

Newly formed and headed by CEO Andrew Oksner, GSL’s first capital raise will be used for development in China.

Prior to joining GSL, Oksner was the managing director for real estate investments at Orion Partners Ltd., an alternative asset fund manager based in Hong Kong and one of the largest owners of assisted living assets in Japan.

Interest is mounting among multiple investor sources, says Oksner, who intends to raise funds “well in excess” of the $19 million CSC invested in Cypress Garden. He says several wealth funds, pension funds, endowments and investment firms are looking into China’s senior care space.

GSL is targeting a $50 million capital raise, with intentions of building a four- to five-property senior living portfolio that CSL will operate.

As the demographics in China’s over age 65 population have grown in the last ten years and are only expected to continue growing, both CSC and GSL believe the market opportunities for senior care will be abundant.

“Over the course of next 10 years, we will see a full-blown development of international quality senior care at all different levels in China,” says Spitalnik. “The numbers of seniors, lack of product and the increasing economic development in China is going to necessitate that this industry grow.”

Written by Jason Oliva