12 December 2018

Developers let sunshine in on sunset years

It’s one of the best elderly care facilities in Beijing. Next to the city’s green lung — the botanical garden and nearby woods — this home for the elderly boasts an address that trumpets what it takes to live there and what to expect.

Residents can expect a certain lifestyle in their sunset years. The facility has 200 spacious flats, a piazza, a gym-cum-theater, a communal hall, a well-equipped clinic manned by professional nutritionists and therapists and an ambulance fleet standing by 24 hours a day.

They can also expect to spend a lot of money. A deposit of 200,000 yuan (US$32,980) plus monthly service charges of at least 6,000 yuan are just for starters. No wonder most its 110 tenants are retired officials and parents of wealthy businessmen or factory owners.

The facility is near a massive villa and townhouse development, making it is easier for affluent residents to house aging family members there when the time comes.

State-owned property heavyweight Poly Real Estate Group (600048.CN), which developed the 200 million yuan Hexihui {和熹會} Home for the Elderly, is planning to replicate it in its numerous luxury property projects in a number of cities, boldly going into uncharted territory amid intensifying competition in the traditional housing market.

The ultimate goal is to operate at least one such elderly care center in each of its future residential developments.

Poly understands the risk. President Song Guangju {宋廣菊} said the company is nowhere near break-even, Economic Observer reports.

Lack of policy support, particularly in the land bidding process, complicates matters. Although Hexihui charges much higher rates than government-run elderly homes, it does not make enough money to cover operating costs, let alone recoup its investment.

Local officials cannot offer any kind of incentives in the absence of guidelines from the central government, so Hexihui registered itself as a non-profit organization to qualify for some tax incentives.

Poly is resigned to the fact that it is not going to make a profit from the business anytime soon, but Song is undeterred, bolstered by Poly’s enormous cash reserve and aggregate sales well above 100 billion yuan in 2013.

While lobbying the government for support, Poly will rely on those resources to keep the business going. It’s convinced it’s doing something right.

Vanke (000002.CN, 200002.CN), Sino-Ocean Land Holdings (03377.HK), Fosun (00656.HK), and JoinuIn Holdings (600745.CN) are also trying to tap the potential of the luxury elderly care business.

JoinuIn has joined hands with Shanghai Jiao Tong University’s medical school to build a massive elderly complex in Suzhou. Sino-Ocean Land is partnering with Emeritus Senior Living, one of the largest providers of elderly services in the United States, to operate an all-in-one community in Beijing.

Vanke has day care facilities for the elderly who live with their children in its residential communities in Zhejiang. Also, it operates assisted living services for senior homeowners, as well as apartment-like sanatoriums for elderly tenants.

A senior Vanke regional executive said these facilities are a strong selling point for its residential properties but these are not expected to be pillar businesses early on, Xinhua news agency reports.

Some policy relief may be on the horizon. Beijing has reserved several sites for elderly service centers in its annual land supply plan. It auctioned one plot last year.

And media reports say Shanghai, Shandong and Jiangsu have adopted similar arrangements. Operators of elderly care facilities will be exempt from land rezoning premiums.

Already, Poly is positioning itself for a full-blown easing of government restrictions on the elderly care industry by converting some of its underperforming hotels near its housing developments into hospitals and elderly care centers.

– Contact the writer at [email protected]



EJ Insight writer

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