CITIC plans $200m China senior housing fund – Exclusive

CITIC Capital, the China-focused private equity firm, is planning to launch a senior housing fund in the country in the second half of this year.

Stanley Ching, senior managing director and head of real estate at CITIC Capital, told PERE the firm is targeting a $200 million equity raise for the fund with commitments from a handful of investors. The fund will be invested in developed assets in first- and second-tier Chinese cities.

CITIC Capital declined to comment on target returns. According to one source familiar with the capital raise, the fund is targeting a 13 to 15 percent internal rate of return.

“This sector is going to benefit a lot from government policy because the government has limited resources that they can allocate to senior housing. They are not going to put a lot of money in this [sector], which will encourage more private sector participation,” explained Ching.

The government has introduced policies facilitating foreign investment in senior housing projects. In its 2016-20 Five-Year Plan, for example, it redefined targets for senior care as providing daytime care covering all urban communities and 50 percent of rural communities – the equivalent of eight million beds by 2020, according to property services firm Colliers 2018 senior housing outlook.

Steven Xing, head of alternatives, capital markets for Greater China at real estate brokerage firm JLL, said that senior living investments in China do not generate as much return as overseas markets because the market is yet to fully mature. He advises investors looking at investing in the market to take a long-term view on their investments.

Despite the lack of clarity on the risk-return profile of senior living investments in China, Xing is seeing more enquiries from foreign investors looking for local partners to invest in the sector. Most of the investors are targeting the high-end senior living community where they can bring in their own expertise and establish their own brand. High-end markets usually target upscale elderly people and these providers charge from 18,000 yuan to 30,000 yuan per month.

In addition to the senior living fund, CITIC Capital also introduced it first yuan-denominated fund to invest in Chinese retail assets in the country’s first and second-tier cities. As of June, the fund had raised 3 billion yuan ($430 million; €380 million) from onshore Chinese insurance companies.