The senior housing industry has experienced exceptional growth in the past few years. Investors from different product types have brought their capital, connections and value to the industry, making it an attractive and successful real estate asset class. The construction cycle is currently booming as new investors and industry veterans take action. In short, the senior housing industry has delivered the results investors want. So much so that the potential for senior housing investments in the US senior housing market has attracted the attention of foreign players.
In particular, Chinese investors have shown great interest in the operating platforms utilized in American assisted living and memory care facilities; with the intent of utilizing the platform in China.
Chinese Money Makes US Senior Housing Investments Shift
Recently, a Chinese equity company attempted to acquire the giant American senior housing operator Brookdale Senior Living. Additionally, Watermark Senior Living, one of the larger assisted living operators in the US, announced the potential sale of their operating company to a Chinese investments company named Keppel. These are major transactions and unique in nature.
Typically, senior housing investments and acquisitions revolve around the purchase of real estate. However, these Chinese investors have only purchased the operating platforms to these companies rather than the real estate themselves.
Why is this the case?
In the past, Chinese investors have had their capital ready to purchase the real estate and company as a whole. However, the Chinese government has prohibited the acquisition of foreign commercial real estate. As a result, investors have redesigned their plans for senior housing investments to acquire only the operating entities.
Chinese investors have been remarkably proactive in these types of sales because China lacks a proper senior housing model despite a pressing need.
Sudden Global Interest in US Senior Housing
Stems from Demand
China needs assisted living facilities to serve its senior population. The total population of people older than 65 in China is greater than the entire population of the United States. This represents the largest assisted living market in the entire world.
Rather than designing and implementing an assisted living model from scratch, Chinese innovators want to circumvent the start-up phase of the business. Instead, borrowing from successful American models, transplanting existing operating systems into their own growing senior housing industry.
China is not alone in showing interest in the US senior housing industry. Senior housing investments in the US still produce some of the highest returns in a real estate backed asset class, making it an attractive choice to those with capital to invest.
Expect More Foreign Involvement in the Future
Foreign interest and investment is unlikely to slow. The JCH Group was recently engaged by a large Chinese equity company to negotiate the sale of a large assisted living platform in the US for replication in the Chinese market. While this evolution makes some people in the senior housing industry uncomfortable, the change is inevitable.
For American investors, it may be difficult to believe that foreigners want to play in the US senior housing space. In terms of the market and public appeal, the senior housing industry has experienced some hiccups. Wall Street’s hostile behavior toward senior housing operators has repeatedly hurt valuations and chipped away at public trust. Media has overblown minor issues within the senior housing industry, creating more trouble than they are worth. However, foreign investors coming from countries with no senior housing industry have seen the promise and potential.
How do American players feel about the change? Smaller operators have warmly received the idea while larger operators have mixed feelings. However, it is very difficult to ignore what Chinese investors offer. They bring an immense amount of capital to ensure that deals close.
For now, foreign investments have inflated valuations at the facility level. Effects on the operational level are not yet known. The long-term impact of foreign involvement remains unclear, but is inevitable.
Work with The JCH Group
to Handle Future Senior Housing Investments
As global interest in the US senior housing industry grows, American investors face an increasingly complicated market place. To ensure that every step is the right step, work with the investments specialists at the JCH Group.
The JCH experts have the experience and information to help you navigate the senior housing industry. We know all there is to know when it comes to assisted living facilities, skilled nursing facilities, independent living facilities and other healthcare properties.
No matter how many players crowd the senior housing industry, senior housing investments should always work for you. The JCH Group ensures that you receive the correct information to make responsible decisions.