China's Cindat Plans to Buy $2 Billion of U.S. Senior-Care Homes

(Bloomberg) -- Cindat Capital Management Ltd., a Chinese investment firm focused on overseas property, is seeking to spend $2 billion this year on elderly homes in the U.S. to capitalize on an ageing population.

The Beijing-based company, backed by bad-loan manager China Cinda Asset Management Co., is evaluating two investments of about $1 billion each into senior housing properties in the U.S., Co-Founder and Chief Executive Officer Greg Peng said.

“This is probably the only sector in the U.S. where the supply has not met the fundamental demand,” Peng said in an interview Wednesday in Hong Kong. “When the baby boomers turn 70 in the next five to 10 years, there’ll be a huge increase in the old-age population, driving demand for senior health-care real estate.”

The U.S. population over 65 is projected to increase 18 percent in the five years through 2020 to reach 56 million, according to the U.S. Census Bureau. Other Chinese investors have also been making acquisitions of senior housing and nursing homes in the country, with Taikang Insurance Group agreeing in November to buy a $1 billion stake in NorthStar Realty Finance Corp.’s health-care real estate portfolio.

Student Housing

Cindat teamed with Beijing-based Union Life Insurance Co. for a $930 million deal announced the same month to buy a 75 percent stake in a portfolio of U.S. elderly homes owned by Welltower Inc. The assets include 11 senior housing properties leased to Brookdale Senior Living Inc. and 28 post-acute care and nursing homes leased to Genesis Healthcare Inc.

The Chinese firm targets an annual nominal return of at least 10 percent from its senior housing portfolio, Cindat Managing Director Allan He said in the same interview. 

“The investment returns are much higher compared with commercial properties, whose returns are usually capped at single-digit,” He said. About 15 percent of the U.S. population over 65 currently lives in elderly homes, a penetration rate that’s set to rise, according to He.

Cindat aims to raise a new $1 billion offshore fund this year that it will use for distressed property deals in China, according to Peng. It plans to start investing from the fund next year and sees most of the opportunities coming from commercial and mixed-use projects, he said.

The firm agreed to buy 70 percent of seven Manhattan hotels from Hersha Hospitality Trust for $571 million last year. It plans to diversify into warehouses and student housing in developed markets like the U.S., the U.K. and Australia, Peng said.