Chinese investors have played major roles in recent blockbuster senior housing deals in the United States, and now the action is spreading north of the border. Beijing-based Anbang Insurance Group is poised to buy a majority stake in Vancouver-based Retirement Concepts for a reported $744 million.
While confirming the deal is underway, Retirement Concepts has declined to publicly disclose terms. However, the $744 million price tag—which equates to $1 billion Canadian—was reported by The Globe and Mail, which cited an unnamed source familiar with the deal.
“Under the partnership agreement, Retirement Concepts will retain a minority stake and will continue to manage the day-to-day operations of all of our seniors’ communities,” the company said in a statement emailed to Senior Housing News. “As a result, there will be no change to staffing plans, the quality of care provided to our residents, nor to our policies, procedures and other operating standards. Retirement Concepts will continue to manage and operate the properties and there will be no change to the staff or senior leadership team at either the community or corporate level.”
Retirement Concepts owns and operates 24 communities, most in British Columbia, with a handful in Alberta and Quebec. It provides independent living, assisted living, and complex care. The company also owns “unused or partly developed land” that is ripe for future expansion, according to The Globe and Mail.
The transaction currently is under review by the Investment Review Division of Canada’s Department of Innovation, and ultimately will be given the go-ahead or denied by Innovation Minister Navdeep Bains.
The department has 45 days to make a decision from the date an application is received, and Bains can extend this by 30 days, according to The Globe and Mail. The Department of Innovation did not reveal when it received the application for this investment.
It is expected that the transaction will go through, given that Prime Minister Justin Trudeau has an interest in attracting Chinese investment and has begun discussing free trade with that country.
“The Canadian government is eager to attract foreign money to make up for insufficient investment capital within Canada and acquisitions by foreigners are rarely rejected,” Globe and Mail reporter Steven Chase wrote.
Core at Any Cost
Anbang follows other China-based companies that are making major ownership plays for North American senior housing and care properties.
Two Chinese corporations, Cindat Capital Management Limited and Union Life Insurance Co. Ltd., earlier this month bought a 75% stake in a portfolio of 11 senior housing properties and 28 long-term/post-acute properties for $930 million. The remaining 25% will continue to be owned by Toledo, Ohio-based real estate investment trust Welltower (NYSE: HCN).
Also in November, REIT NorthStar Realty Finance Corp. (NYSE: NRF) sold a 19% interest in its health care portfolio—including senior housing properties—to Taikang Insurance Group, for $1 billion.
These deals are part of a wave of real estate investment that Chinese companies have been making in overseas markets. Given that China is a “planned economy” and most firms have some measure of government involvement and/or support, this investment surge has come, in part, as a directive of the state. The government has had an interest in projecting financial power while also tapping into steady income streams, according to a report from consultancy Knight Frank.
Chinese investment in foreign real estate increased from $3.72 billion in 2011 to $15.72 billion in 2014, The Wall Street Journal reported.
In keeping with the goals of flexing Chinese investment muscle while also securing steady revenue, much of this spending went toward trophy real estate. Anbang in particular has been at the forefront of this movement.
“Anbang has been the poster child for aggressive and sizable offshore investors pursuing what we have called a ‘core-at-any-cost’ plan,” Fitch Ratings analyst Britton Costa told SHN. “This transaction would follow their $6.5 billion acquisition of Strategic Hotels & Resorts, their failed bid for Starwood Hotels & Resorts and their $2 billion purchase of the Waldorf Astoria hotel.”
The willingness of the Chinese investors to pay high prices to be associated with premium brand names such as Starwood and Waldorf Astoria appears to have held true in senior housing, given the price tags on the Welltower, NorthStar, and Retirement Concepts deals.
Yet, even as news of the Retirement Concepts deal broke, there were signs that Beijing might be reversing its earlier moves to make it easier to invest overseas, and clamping down on the offshore spending spree.
The Chinese government is undertaking a “massive policy shift designed to stem capital flight by curbing outbound investment,” the South China Morning Post reported Tuesday. Specifically, the changes are meant to rein in the “trophy-asset shopping spree” that Anbang and similar companies have been on, the newspaper stated.
Among the potential changes are banning any investment exceeding $10 billion and any merger/acquisition valued at more than $1 billion, if it’s outside the Chinese investor’s core business.
In addition to its concerns about the amount of capital leaving the country, the Chinese government reportedly is reacting to concerns about money laundering.
However, senior living providers should not feel too glum even if the moment to seize large amounts of Chinese capital has passed. A wide range of capital still is available for senior housing, and foreign investors continue to be attracted to the space, Honn emphasized. For instance, his firm recently closed an acquisition of a Florida senior housing community that was bought by a joint venture between Los Angeles-based Lowe Enterprises Investors and one of its clients from the Middle East.
“While I can’t comment specifically on the Anbang deal, what I can say is that foreign investors continue to find seniors housing to be a valuable investment as we’re continually seeing foreign capital pour into this space,” Honn said.
Written by Tim Mullaney