Shanghai-based family office management company RIC Capital Management has brought together a handful of Chinese family offices and high net-worth individuals for a second round of investment in a senior housing development project in Hangzhou, PERE has learned.
Once the second tranche of investment is complete, the total investment could range from $100 million to $150 million, depending on how much debt the families are able to secure for the project and the development’s cash flow, according to Ruifen Xu, the founding partner of RIC. The 1.2 million-square-foot development has several buildings, and RIC first invested in the project in 2011.
Rather than just looking at this as a development project, however, Xu said the families are hoping to turn it into a yielding project after it is completed in 2016 and have reserved the option to hold it for the longer term. The compound IRR of the club deal is expected to be about 20 percent over the first five years, and Xu expected that the long-term yield could be as high as 10 percent.
“In the third year, some of the smaller families also could exit at a fixed 13 percent return,” Xu said. “So that gives them some downside protection.” She added that, while all of the investors are domestic at this point, there is at least one overseas family office interested in joining.
This is RIC’s first senior housing project as a firm, but Xu said the family office investment company is hoping to do more in the future. For this project, it already has hired a senior housing specialist investment and management team, which is looking to combine the housing environment with the medical care that China’s elderly need. “Our hope is that we can do five of these projects in 10 years,” she added.