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Evergrande Group gets into health-care business to boost profit
[BEIJING] It's called "Asia's top-notch plastic surgery hospital," according to the promotional brochure for the grand, Chinese palace-style building near the port of Tianjin.
With nearly 100 VIP suites and doctors from South Korea offering Chinese clients US$2,400 nose jobs and US$1,000 double-eyelid plasties, the cosmetic surgery palace is a gamble by one of China's most indebted developers, China Evergrande Group: get into the health-care business as a new strategy to boost profit. It's a play that takes advantage of cheaper prices for land designated for health-care use, allowing developers to reap a premium for nearby residential towers that offer home buyers easy access to hospitals, clinics or nursing homes. Developers are also betting they'll be able to rake in profits directly from soaring demand for medical services.
With the rapid growth of the property market expected to slow in the coming decades, companies such as Dalian Wanda Group and Evergrande, as well as smaller players including Tahoe Group Co. of Fuzhou, are pouring in billions. Dalian Wanda so far has announced plans to invest at least 85 billion yuan (S$17.1 billion) in 13 hospitals, including an ambitious hospital park with 30 heath-care firms headquartered in Chengdu. Suning Universal Co, formerly a residential property developer in Nanjing, has given up building homes in order to plunge into cosmetic surgery clinics China-wide with a 5 billion yuan fund to invest mainly in such hospitals. It purchased one in Shanghai in November.
"What developers truly expect by building hospitals is to boost housing prices by adding value to the complex by integrating all those facilities," said David Hong, Hong Kong-based head of research at China Real Estate Information Corp. "For a hospital itself, the return on investment is usually quite poor. Developers generally want to make experimental forays to see if they can profit from related business." In Tianjin, prices at Evergrande Oasis, the residential compound adjacent to the plastic surgery hospital - which includes a hot-spring spa called Paradise and a European-style "super five-star hotel" - surged 16 per cent to 8,474 yuan a square meter in 2016 after the hospital opened, according to data provided by property consultant Savills Plc. The jump was more than double the increase in the same period at a project by Shenzhen Overseas Chinese, a smaller developer that didn't build health-care services nearby, the data show.
New Era Evergrande Health Industry Group, the unit leading the health-care push, said China has entered a new era of consumption growth, and demand for health and beauty is on the rise. Evergrande's other ventures include 12 health-management centers that provide primary and senior care, and a 5 billion yuan cancer hospital linked with Boston's Brigham and Women's Hospital, in Boao, on China's retirement island of Hainan.