Shinsei Sets Up Japan Nursing Home Fund Before REIT Listing

Shinsei Bank Ltd., the Japanese bank partly owned by J. Christopher Flowers, set up a fund that bought a nursing home for 1.7 billion yen ($19 million), as it plans to list a health-care real estate investment trust.

The bank has raised about 500 million yen from individual investors and financed the rest of the purchase through loans, said Takashi Fujimura, the general manager of Shinsei’s health-care finance division. It plans to set up separate funds to acquire at least one property each quarter as it prepares for its 100 billion yen REIT listing in 2014, he said.

The so-called bridge fund will become a part of Shinsei’s health-care REIT that will invest in nursing homes and properties for retirees in Japan, which has one of the world’s fastest-aging populations. One in every four people in Japan will be older than 65 in 2014, compared with 9.6 percent in China and 14 percent in the U.S., according to data compiled by the U.S. Census Bureau.

“The interest generated from individual investors confirmed our belief that the REIT will do well,” Fujimura said in an interview in Tokyo yesterday. “Because the rental income generated from retiree homes is steady, it provides a very stable return for investors.”

The government set up a committee in September to discuss how to allow the listing of health-care REITs in an effort to increase the supply of such facilities. Shinsei is a member of the panel representing the financial sector, according to the land ministry.

Nursing Shortage

The fund, which costs 2.5 million yen per unit for individuals to invest, offers a 3.5 percent annual return, Fujimura said. Shinsei plans to target nursing homes with a value of at least 2 billion yen, he said.

About a quarter of 421,000 applicants had to wait for the availability of a bed in public nursing homes in 2009, according to the latest data from the Ministry of Health, Labour and Welfare. The number of people using elderly care facilities is estimated to increase by 25 percent to 1.15 million in 2015 from 920,000 in 2011, according to data from the Cabinet Office.

Japan has about 4,000 operators of housing projects for the elderly, Fujimura said. Shinsei will focus on the top operators and examine their credit as well as the quality and past performance of each property, he said.

Shinsei also plans to invest in a company that operates a health-care REIT as a way to enter the market and provide lending to the trust, Fujimura said.

“This is a very young industry,” said Fujimura. “There are many small operators. It requires someone with specialized skill to be successful in this market.”