Chinese Real Estate Giants Enter Healthcare: Strategies, Investments, and Early Outcomes

Statistical data shows that among the more than 160 real estate companies listed on China’s A-share market, over 60% are planning or undergoing business transformation, with nearly 20 of them intending to completely exit the real estate sector. Among the developers already in transition, a significant proportion are entering or planning to enter the healthcare and medical services industry.

VCBeat has compiled and analyzed approximately 15 real estate developers in China that have already established a presence in the healthcare sector, revealing four key characteristics: all are publicly listed companies with substantial financial resources, frequently engaging in aggressive acquisition sprees; they are keen on partnering with government entities to invest in and build hospitals; they are actively exploring “Internet healthcare” initiatives; however, scaling up this sector will still take considerable time.



Acquisitions and Equity Investments

From a macro perspective, the growth rate of the real estate industry is gradually slowing down, and real estate companies must seek new profit growth points. Healthcare, often referred to as “the evergreen sunrise industry,” is clearly a promising investment direction. The State Council’s Several Opinions on Promoting the Development of the Health Service Industry proposed that the scale of China’s health service industry would reach RMB 8 trillion by 2020.

Acquisitions and equity investments are the most common approaches for real estate enterprises to enter the healthcare sector, as exemplified by Shentian Di, Yuncheng Medical, and Yihua Health.

On the evening of February 16, Shentian Di A, a real estate listed company that had been suspended from trading for six months, released its restructuring plan. The company proposes to acquire 100% equity interests in two internet healthcare enterprises—Youdeyi and Yingyitong—through a combination of share issuance and cash payments, with transaction valuations of RMB 2 billion and RMB 3.5 billion, respectively. Of the RMB 5.5 billion raised by Shentian Di, RMB 1.1 billion will be used to pay the cash consideration to the individual and corporate shareholders of the acquired companies, while the remaining funds will primarily be allocated to projects such as the construction of a Health Cloud data center, the establishment of offline service centers for online hospitals, and the acquisition (or trusteeship) of hospitals along with investments in hospital infrastructure development.

Notably, one of Youdeyi’s shareholders is Yihua Health (formerly known as Yihua Real Estate). In late 2014, it acquired a 20% stake in Youdeyi for RMB 120 million. This time, it sold the 20% stake to Shentiandi for RMB 400 million. Over just more than a year, Youdeyi’s valuation surged from RMB 600 million to RMB 2 billion, enabling Yihua Health to easily pocket a profit of RMB 280 million, representing an investment return rate of 233%.

The enthusiastic backing from capital has accelerated the rise in valuations of internet healthcare companies, thereby attracting more market entrants.

Yihua Health entered the healthcare sector in 2014 by acquiring 100% equity of Guangdong Zhongan Kang Logistics Group Co., Ltd. for RMB 720 million. The latter is a professional service provider specializing in “integrated non-clinical” services within the medical logistics and support industry. In October of the same year, the Guangdong Provincial Internet Hospital, established in collaboration with the Second People’s Hospital of Guangdong Province, was officially launched. In February 2015, Yihua Real Estate was renamed Yihua Health, marking its formal entry into the healthcare industry.

Yunsheng Medical’s entry into the healthcare sector occurred around the same time as that of Yihua Health, and their strategic paths were similar. In September 2014, it took a controlling stake in Rongda Information, a regional healthcare IT company. In February 2015, it acquired Medics, a hospital ECG network informatization company. In May 2015, the company gained control of Jianzi Technology to establish a presence in the consumer-facing segment of ECG network informatization devices, and set up a healthcare industry M&A fund. Meanwhile, Yunsheng Medical, together with Medics and Rongda Information, jointly established Hangzhou Yunsheng Health Technology Co., Ltd.

As planned, Yunsheng Health will leverage Medics’ resources from over 300 Grade A tertiary hospitals and its equipment technology development capabilities, as well as Rongda Information’s medical and health resources spanning more than 100 county-level institutions across eight prefecture-level cities. With Medics at the core, it will establish a healthcare informatics and health cloud service platform that integrates online and offline services, with a focus on electrocardiography (ECG) and electroencephalography (EEG). By integrating Jianzi Technology’s wearable device technologies, the company aims to create a “cloud-based remote cardiovascular diagnostic service platform within a vertical ecosystem.”

Keen on Investing in Hospital Construction

Another typical example of real estate enterprises entering the healthcare sector is investing in and building hospitals, with Vanke Real Estate, Wanda Real Estate, and Lujing Holdings as representative cases. Currently, there are five main forms of hospital investment by real estate enterprises: equity acquisition, development of healthcare industry parks, financial investment in medical institutions, direct investment and construction of hospitals, and joint investment and operation with partners.



In 2011, Vanke applied to the Shenzhen municipal government for permission to operate medical facilities in Shenzhen. In 2013, the Vanke Children’s Hospital was slated to be located in the Bao’an Central District of Shenzhen, but it had not yet entered the construction phase. Also in 2013, Vanke announced a joint investment totaling RMB 250 million with Shanghai New Hongqiao International Medical Center and Fudan Medical Industry Investment Co., Ltd., among others, to establish the Fudan-Vanke International Children’s Hospital. Reportedly, construction of the Fudan-Vanke International Children’s Hospital is expected to commence this year.

Greenview Holdings is also bullish on the children's hospital market.

In March 2015, Lujing Holdings entered into a strategic partnership with Beijing Children's Hospital. In September, the company announced a private placement plan to raise RMB 10.05 billion. The proceeds were designated for the construction of four physical hospitals, including the Beijing Children's Hospital Group Oncology Hospital (RMB 1 billion), the Beijing Children's Hospital Group Hospital for Pediatric Genetic Diseases (RMB 960 million), the Tongzhou International Oncology Hospital (RMB 2.3 billion), and Nanning Ming'an Hospital (RMB 2.1 billion); one medical center, namely the Precision Oncology Medical Center (RMB 1.95 billion); and two platforms, comprising the Cloud Platform for Pediatric Health Management (RMB 1.03 billion) and the Medical and Health Data Management Platform (RMB 100 million). This marked Lujing Holdings' comprehensive transformation into the healthcare industry.

Wanda has opted for a high-end strategy to enter the hospital market.

Early this year, Wanda Group announced that it had signed a cooperation agreement with International Hospital Group (hereinafter referred to as “IHG”) in Beijing. Wanda will make a total investment of RMB 15 billion to build three comprehensive international hospitals in Shanghai, Chengdu, and Qingdao. These hospitals will be operated and managed by IHG under its brand, known in Chinese as “Yinci Wanda International Hospital.” IHG is a leading global international healthcare group established in 1978 and headquartered in the United Kingdom. It manages more than 450 healthcare projects in over 50 countries worldwide. Its clientele includes the governments of 22 countries, the United Nations, the World Bank, and high-end clients globally.

According to the joint plans, the future Shanghai Yingci Wanda International Hospital will have 1,000 beds with an investment of RMB 8 billion; the Chengdu Yingci Wanda International Hospital will have 500 beds with an investment of RMB 5 billion; and the Qingdao Yingci Wanda International Hospital will have 200 beds with an investment of RMB 2 billion. Wanda stated that all three hospitals are designed and built in accordance with top international standards, and IHG will ensure that the operations of the three hospitals achieve accreditation from international healthcare organizations.

In December 2013, Evergrande Group announced a collaboration with Harvard University to establish Harvard Hospital in China, but the project failed to materialize. In September 2014, Evergrande acquired Wonjin Plastic Surgery Clinic, a comprehensive plastic surgery hospital founded in South Korea in 1999, and jointly established the Evergrande Wonjin Medical Aesthetic Hospital. In February 2015, Evergrande Real Estate acquired a 74.99% stake in New Media and renamed the company Evergrande Health. Its operational portfolio covered four major business segments: “Internet Plus” community health management services, new high-end international hospitals, the elderly care industry, and medical aesthetics and anti-aging. In June 2015, the Internet Community Health Management Center, jointly established by Evergrande Health and the University of Nebraska Medical Center, commenced operations.

It is evident that real estate enterprises possess substantial capital and inherent advantages for investing in hospital construction. However, their lack of professional knowledge and experience in the healthcare industry presents significant challenges, particularly in securing physician resources, hospital management, business expansion, and brand building. Consequently, collaborating with well-established professional medical institutions in the early stages is an inevitable strategic choice for real estate companies seeking to cross over into the healthcare sector.

Exploring Internet Healthcare

After acquiring the healthcare IT company Rongda Information, Winshare Medical began participating in the informatization construction of regional health systems.

Last year, Yunsheng Medical successively signed framework cooperation agreements related to the healthcare industry with health authorities in Lishui, Zhejiang; Dafeng, Jiangsu; and Wenzhou, Zhejiang. Its announcement indicated that the RMB 437 million raised would be allocated to the following areas:

First, develop specific application modules for health, medical care, pharmaceuticals, and insurance based on the big data platform, and build it into an open platform to attract various entities to join;

Second, participated in the construction, renovation, and operation of health information platforms in Lishui (Zhejiang), Dafeng (Jiangsu), Wenzhou (Zhejiang), and other regions;

Third, Operation and Services of the Regional Health Ecosystem: This includes (1) the deployment of smart health service packages, involving collaboration with village-level medical and health institutions in Lishui, Dafeng, and Wenzhou to provide smart health monitoring devices to local patients with chronic diseases and the elderly; (2) the construction and operation of an internet-based tiered diagnosis and treatment platform, entailing the establishment and operation of remote consultation systems in major municipal hospitals, county people’s hospitals, township health centers, and village health service points in Lishui, Dafeng, and Wenzhou, thereby creating a four-tier internet-based tiered diagnosis and treatment platform spanning municipal, county, township, and village levels; and (3) the development of community health service networks, by establishing community health service outlets in main streets and townships across Lishui, Dafeng, and Wenzhou, which not only facilitate grassroots operational implementation and after-sales services but also offer related health product sales and healthcare services.

In addition to Shentiandi, Yihua Health, and Yunsheng Medical, which have directly entered the internet healthcare sector through acquisitions, a growing number of real estate enterprises are exploring the development of their own related platforms. Both Evergrande and Lujing Holdings have announced plans to venture into corresponding internet health management platforms, although no significant progress has been observed to date.

Sino-Ocean Land aims to establish a commercialized, chain-based community healthcare network that integrates community clinics, two-way referral systems with tertiary (Grade 3A) hospitals, and internet-based telemedicine platforms. This approach seeks to incorporate high-caliber physicians into the system, creating a high-quality, efficient, and encompassing community healthcare network.

The first step for Sino-Ocean Land to implement this model is to open clinics.

Early this year, Sino-Ocean Land’s first clinic, “Haiyihui,” opened in Wangjing. Covering an area of approximately 2,500 square meters, the clinic currently provides medical services such as health check-ups, medical consultations, home visits, and chronic disease management. It has established collaborations with high-quality medical resources and tertiary hospitals through a “medical consortium” model, creating dedicated green channels for patient referrals and diagnostic transfers.

Haiyihui has also specially developed a registration tool—the Yuanyang·Miaoyi Registration Kiosk. This kiosk will be installed on the activity platforms of Yuanyang communities. Residents can simply scan their ID cards on the machine, which will then help “secure appointments” based on patients’ preferences. It can instantly snap up specialist slots released by hospitals in real time. As planned, Miaoyi Registration Kiosks will be deployed across all residential communities developed by Yuanyang Real Estate, achieving the goal of “bringing authoritative specialists into community clinics and sparing residents the need to queue early for appointments.”

In the future, Miaoyi registration kiosks will store doctor and patient data to build a big data platform for data generation and storage, enabling real-time insights into patient needs and market trends to deliver optimal treatment services.

Sino-Ocean Land is also building a broader commercial ecosystem: it has explored a third option between basic medical insurance and high-end healthcare by partnering with commercial insurers to launch specific disease insurance products, providing patients with health services such as caregiving, wellness and prevention, and childhood vaccinations.

What were the results?

Statistics clearly show that most real estate companies undertook their transformation during 2014–2015, which coincided with the inflection point in China’s domestic real estate market. With traditional property development businesses stagnating and new ventures still in the incubation stage, the majority of these companies experienced declining performance or even losses, pinning their hopes on transformation to reverse this predicament.

Although investments in the healthcare sector may not yield direct financial returns in the short term, such investments tend to have a positive impact on the stock prices of listed companies in the near term.

Take Yihua Healthcare as an example. For many years, its stock price hovered below RMB 10. Following the announcement of its strategic transformation, the share price surged from a low of just over RMB 5 in April 2014 to RMB 54 by April 2015. Although it has since declined steadily, it remains above RMB 20. Lujing Holdings followed a similar trajectory. After the completion of its restructuring in September 2015, its stock price climbed sharply, rising from RMB 11 in late February to nearly RMB 40 by late November.

Greenview Holdings projected a 2015 net loss of RMB 27.4 million to RMB 20.2 million, while Yuncheng Medical estimated its net loss for the previous year at RMB 43 million to RMB 88 million; both companies reported their first-ever annual losses. Yihua Health achieved a turnaround from loss to profit, primarily driven by the profits contributed by its acquisition of Zhongan Kang Logistics Group. According to Yihua Health’s 2015 annual earnings forecast released on January 18, 2016, its 2015 net profit was expected to increase by 111.27% to 151.51% compared with 2014, with the specific amount estimated between RMB 63 million and RMB 75 million.

Shen Tiandi’s two acquired internet healthcare companies, Youdeyi and Yingyitong, initially incurred losses after their establishment and only turned profitable in the second half of 2015. It is reported that Youdeyi and Yingyitong achieved profitability by providing health management services to members through the Guangdong Provincial Online Hospital Platform, making them among the few internet healthcare companies in China to achieve profitability. However, industry insiders point out that online hospitals currently remain largely regional. Expanding and replicating this model in other provinces would entail rebuilding infrastructure and facing internal competition issues such as patient diversion. Therefore, whether these companies can truly scale up remains to be seen.

Investment in the healthcare sector has long been characterized by three major features: substantial capital requirements, high professional barriers to entry, and slow returns. All enterprises seeking to capture a share of the healthcare market must be prepared for a protracted struggle.