Chinese Investors Still Have Intense Appetite for U.S. Senior Housing

Going forward, Chinese investors may be a lot more active in U.S. seniors housing.

That’s because there’s an “intense appetite” among Chinese capital providers for U.S. senior housing assets, John Stasinos, managing director-healthcare at private equity firm Cindat Capital Management, said last week at the National Investment Center for Seniors Housing & Care (NIC) Spring Investment Forum in Dallas.

Cindat was established to guide and safeguard Chinese capital in their foreign investments, as well as to advise and help manage foreign capital with respect to their investments in China.

Chinese investors are drawn to U.S. senior housing for a variety of reasons, including the fact that Chinese companies are actively trying to figure out how to best go about building the property type in their own country as the population there ages. By 2050, there’s anticipated to be approximately 330 million people over 65 in China, according to the United Nations.

“Senior housing is a burgeoning market domestically in China. Nobody’s really got it figured out,” Stasinos said. “They’re looking abroad to familiarize themselves.”

Consequently, Stasinos believes that the U.S. senior housing sector will see an influx of Chinese capital in the years to come.

“Long-term, there will be no shortage of Chinese capital coming into the marketplace,” he said.

Chinese investors, including Cindat, have already burst onto the scene in some high-profile U.S. senior housing deals.

Back in 2016, for instance, New York-based NorthStar Realty Finance Corp. (NYSE: NRF) entered into a definitive agreement to sell a joint venture interest in its health care real estate portfolio to Chinese insurance company Taikang Insurance Group for $1 billion. That same year, Cindat partnered with China-based Union Life Insurance Co. Ltd. to buy a 75% stake in a portfolio of 11 senior housing assets owned by Brookdale Senior Living (NYSE: BKD), along with 28 long-term/post-acute assets, for $930 million.

Still, there has been some concern that changing policies in China could be constraining overseas real estate investment.

Unrealistic expectations at home

Back on the home front, owners of U.S. senior housing properties who are looking to sell are running into unexpected difficulties, which in many cases stem from unrealistic expectations.

“Sellers say they’re sellers, but they’re not. And buyers have very different ideas of where pricing should be,” Stasinos explained.

Specifically, many sellers are holding out for prices that are unattainable—and their hesitancy to sell communities for lower prices is leading to stalled deals.

“There’s buyers out there for assets, but the sellers aren’t ready to sell,” Stasinos explained. “[There are] transactions that are close, close, close, but it’s just not getting there.”

Still, there’s no shortage of potential buyers—whether foreign or domestic.

“There is somebody who’s going to buy your 20-year-old portfolio, but they’re not going to buy it at the cap rate you want,” Stasinos said.

Looking ahead

Chinese investors aren’t the only foreign group eyeing U.S. senior housing.

“Globally, people are interested in the space,” Stasinos explained. “I think it’s inaccurate to say it’s coming from one region.”

At the same time, there are a number of untraditional investors who are now investing in U.S. senior housing—including infrastructure investors.

Meanwhile, U.S buyers and developers still have quite some time to wait before demographics pick up in their favor.

“The silver tsunami is very slow-moving,” explained Frank Small, managing director at GMF Capital, said during the panel discussion.

“The demand story is strong, but it’s not here,” Stasinos echoed.

Written by Mary Kate Nelson