Shinsei Bank Plans Japan Health-Care REIT Amid Aging Population

Shinsei Bank Ltd., the Japanese lender partly owned by J. Christopher Flowers, plans to set up a health-care real estate investment trust to capture growth in one of the world’s fastest-aging nations.

The bank seeks to start the REIT with about 100 billion yen ($1.25 billion) in two years, said Takashi Fujimura, general manager of the health-care finance division at Shinsei. The bank may be able to list a REIT as early as 2014, once the Japanese government establishes guidelines to allow the listing of such REITs, he said.

One in every four people in Japan will be older than 65 years in 2014, according to data compiled by Bloomberg. The bank plans to provide lending for nursing homes and senior housing in Japan to match the rising demand as it expects the nation’s health-care market to double in size to 6 trillion yen in five years, said Fujimura.

“There is no other asset types that offer double growth in volume,” said Fujimura. “Health-care assets are scarce from the start. It offers a tremendous growth opportunity.”

About 23 percent of 421,000 applicants had to wait for the availability of a bed in public nursing homes in 2009, according to the latest data available from Japan’s Ministry of Health, Labour and Welfare. The number of people using nursing homes is estimated to increase by a quarter to 1.15 million in 2015 from 920,000 in 2011, according to data from the Cabinet Office.

REIT Lending

The Japanese government is preparing to allow the listing of the REITs in a bid to encourage more supply of such facilities amid Japan’s aging population, the land ministry said. The government in September set up a committee to discuss details to allow the listing of health-care REITs. Shinsei is a member of the committee representing the financial sector.

Shinsei plans to invest in a company that operates health-care REIT as a way to get into the market and will also provide lending to the REITs, Fujimura said. It costs about 1 billion yen to 2 billion yen to build 50 to 100 room senior housing, he said.

“Building senior housing facilities needs a lot of capital and it would be impossible for the local owners to finance such projects,” said Fujimura. “It’s best to go to the capital market or finance by using securitization.”

An average nursing-home facility charges about 100,000 yen to 250,000 yen per person per month, while luxury health-care housing can cost as much as 800,000 yen per person, according to presentation material provided by Shinsei.

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