Talking Turkey with Kevin Ryan

At the recent Ageing Asia Investment Forum in Singapore, one of the speakers I particularly enjoyed hearing was the Managing Director of Waterbrook Lifestyle Resort and Waterbrook China.  Kevin has established himself as a very successful developer and operator in Australia and is eager to see whether his approach can be successfully exported to China.  When we spoke again last week, Kevin was quick to point out that “we [the industry] are learning as we go … no one has a handle on this … we are going to burn our hands a bit … anyone who says they know what is going to work in China isn’t being honest with themselves.”  Kevin’s approach echoes what we have heard from other prominent developers and operators:  patience and discipline will be rewarded.  He also reinforced what we have been writing about relative to getting developers and operators in phase with one another, that “they have a system in China unlike anything in the world:  they can make big things happen very quickly … it is the provision of services where they are struggling.”

Kevin has been exploring China for the past several years and shared his tentative plans for Waterbook’s Xian facility.  Planned on a 330,000 m² site approximately one hour from Xian, Waterbrook’s community will feature 576 independent senior living units spread across a blend of 1, 2, 3 and 4 bedroom units.  The Xian development will include an 80 bed aged care facility, although Kevin was quick to point out to me last week that they are not planning on building a hospital on-site; as he said, “hospitals are too specialized – we are not planning on doing acute care, rather just aged care – we want to leave hospitals to the experts.”  Kevin also understands that the closer your aged care facility is to what China perceives as a true hospital, the more complicated your licensing process becomes.

Scheduled to be built out over 3 years, the Xian project will result in 80,000 m² of saleable space.  Kevin shared with me one of the challenges he has faced in China are the regulations limiting how developers of senior care space (or any sort of real estate developments for that matter) approach pre-selling.  As western operators know, most of the time you have to presell 50% of the planned development before you can get the necessary financing; in contrast to this, China has what Kevin described as “a completely different model … the developer has to put up the entire shell then get a license to presell.”  But, he quickly added, even this has a caveat to it because “every city is different.”

Kevin’s Waterbrook Xian is definitely focused on the high end of the market, a sensibility he understands well based on what he has built in Australia; although, Kevin was quick to add that the scope of working in China can make even the most established operator or developer queasy.  He shared that at his end of the Australian market, “a big development would be 80 apartments.  In China they don’t want to talk about anything less than 300.”  He chuckled when we talked and added, “I have some potential Chinese developers who have approached me and are OK with doing just one or two developments to prove the concept, but I also have others who are confident they can build 100 different developments at one time!”

Based on his preliminary due diligence, Kevin anticipates that the majority of his clients will be self-funded (in other words, they and not their children will be the ones paying for their entrance and long-term care).  Planned to begin preselling in April 2013, the Xian development will reflect a proprietary relationship between Waterbrook and the Chinese real estate developer.  If you want to learn more about what that relationship is going to look like then stay tuned (or, come to the upcoming IMPACT Retirement Living World 2012 Conference in Shanghai at the end of this month and ask Kevin yourself!).

I wanted to get Kevin to expand on what he saw as the biggest challenges Western operators need to be aware of and he first brought up the issue of educating and training a work force.  Secondly, he added that in China operators would need to “take away the preconceived notions of what aged care looks like because at the moment, no one wants to put any of their families into a nursing home.”  But I found his final comments the most interesting and worth quoting at length:  “Before you get too far into China, it is very important for Western operators to be very sensitive that we have to acknowledge we don’t have an operating model for China … we have tools we have developed over years of running our own facilities – but what works in your country may not work in China … yes, we have all the skills to be successful in China, but you have to dismantle the building blocks of your business and rebuild your model from the ground up.  If you keep that attitude, they will respect you, and you will be successful.”