Investment in Next-Generation Assets Plus
Cashflow Structure of private nursing homes
Hulic Reit, Inc. (Hulic Reit) concludes a long-term lease contract with the nursing care provider that is the tenant. Nursing care providers that operate elderly care nursing homes of the usage right type with inclusive care services receive payments from various sources: a monthly utilization fee and an initial lump sum from the resident and a nursing care insurance fee from the insurer (the local municipality). The revenues of the nursing care provider are affected by changes in the number of residents, arrears in the payment of monthly utilization fees, and fluctuations in nursing care fees due to changes in the social insurance system. In contrast, the rental fees collected by Hulic Reit are in principle not affected by fluctuations in the revenues of the nursing care provider.
Impact of Trends in the Social Insurance System
Among services provided by private nursing homes, the business potential of long-term care services for the elderly is being affected by trends in the social insurance system, particularly in the long-term care insurance system. In the case of private nursing homes with inclusive care services, where the nursing care provider that is the tenant provides the nursing care services itself, the nursing care provider’s level of income may be affected. However, as the facilities in which Hulic Reit invests are mid-price-band and above nursing homes, the proportion of their income accounted for by nursing care insurance payouts is lower than for nursing homes in other price bands. The impact of changes in the system is therefore likely to be relatively small.