Originally published Saturday, September 10, 2011 at 10:00 PM

Sunday Buzz

Seattle firms plan senior housing for China's booming elderly population

Serena Xie is sure there's a market in China for American-style, for-profit senior-care facilities. Her own family underscores the demographic and social changes creating the need.

By Rami Grunbaum, Seattle Times deputy business editor

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Serena Xie is sure there's a market in China for American-style, for-profit senior-care facilities — her own family underscores the demographic and social changes creating the need.

Her father and mother had a total of nine siblings who could potentially take care of aging parents; the 36-year-old Xie, by contrast, is a single child.

Her mother provided nursing care for Xie's grandmother, who had Alzheimer's and other medical problems. But Xie has a full-time international job and says that in her generation everyone works long hours.

So when her parents, now in their 60s, can no longer live on their own and need some medical care, she doesn't want them going into a "quite awful" government-run complex where four strangers may share a room.

"We have the financial resources to send them to a nicer place," she says about the growing cohort of upper-middle-class Chinese her age.

The Seattle-based firm where Xie is managing director, Cascade Healthcare, said this past week it's the first foreign company to receive government approval to open a for-profit senior-care facility in China.

Next month it will begin the $5 million renovation of a Shanghai hotel into a 100-bed senior-housing project that offers skilled nursing and rehabilitation capabilities — as well as traditional Chinese medicine and massage.

Cascade is a joint venture between Emeritus, the publicly traded Seattle company that runs 484 U.S. assisted-living centers, and Columbia Pacific Advisors, a wealth-management firm headed by Emeritus chairman Dan Baty.

Merrill Gardens, another in Seattle's contingent of major players in the senior-housing business, also has a Shanghai office and is "finishing up" a joint-venture deal that will be the cornerstone of its plans in China, says its president, William Pettit.

In China's latest census, published in April, "the biggest theme was that China is aging much more rapidly than expected," says Kam Wing Chan, a professor of geography at the University of Washington.

In a decade, people 65 or older made "a very rapid jump" from 7 percent of the total population to nearly 9 percent; in bigger cities it's already approaching the U.S. average of 12 percent, says Chan, who specializes in China's demographics.

At the same time, the tradition of caring for one's own parents at home is running up against the realities of small and costly urban-housing units and the younger generation's newfound notions of independence, he says.

"The demand is definitely there — and I don't think the tradition is an obstacle," Chan says.

Hong Kong, which is governed separately, has experimented with nonprofit and commercial models for senior housing, he adds, but "Beijing is still at the beginning of thinking about this."

Cascade aims for as many as eight projects in the booming Yangtze River Delta around Shanghai in the next few years. It plans to charge $2,000 or $3,000 a month for its housing — clearly a big number for a country where the average annual income last year was an estimated $7,600.

But Xie says that with 2 million seniors in Shanghai, and plenty of high-wage residents who may want to bring aging parents from distant rural homes, there's no danger of running short of customers. The challenge, she says, will be to create the right mix of Western and Chinese features, and to explain this unfamiliar type of care facility to people who are "very savvy consumers."

Baty made an unsuccessful attempt to create senior housing in China in the late 1990s, but that retirement community never opened.

One difference now, says Xie, is that "the government has opened the door."

That's evident in China's recently approved five-year plan. The blueprint for the state-controlled economy's direction singled out caring for seniors as a major issue and welcomed foreign investment in the sector. That has unleashed "a flood" of interest from both Chinese and foreign firms, she says.

Another difference from Baty's earlier effort is Cascade's plans to combine housing and medical care. China's hospitals are crowded, and the government is encouraging alternative settings for people who may need nursing or rehab services but shouldn't be in a hospital, he says.

Merrill Gardens' Pettit is also upbeat about China's potential, predicting his company will become "a strong regional player in China," as it is in the U.S.

But he cautions that it will take time to figure out what works in China, "where the willingness to actually pay for care for seniors outside the home is a little less certain."

His company is advising several financial investors that want to jump in with different approaches. One client is designing an 800-unit senior-housing facility, alongside 1,700 units for sale to families that have a senior living with them and want home health care.

"The real question will be not just gaining approval but delivering a product at a price point that middle-class Chinese are willing to pay for," he says.

Rami Grunbaum:

or 206-464-8541

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