The combination of RSA and real estate


The ageing of the population is one of the major processes of change of this century, with repercussions not only related to the quantitative growth of the more mature segment of the population, but also to the qualitative changes affecting the various stages of life.

The gradual and continuous rise of the average age will lead to the percentage of people over 85 years of age increasing in all European countries by 2040, leading to an already growing demand for care services for the elderly.

Designed to meet this need, RSA (nursing homes), nursing homes and residences for the elderly are the answer, from a real estate point of view, to this need and, in particular, are characterised today by a strong demand from real estate investors and managers specialised in this specific sector.

Historical background of RSA

Assisted living facilities, abbreviated as RSAs, introduced in Italy in the mid-1990s, are facilities with a healthcare connotation but not hospitalised that host, for a period varying from a few weeks to an indefinite period, non-self-sufficient persons who cannot be cared for at home and who require specific medical care by several specialists and/or articulated healthcare assistance.

They differ from rehabilitation facilities due to the lower intensity of health care and the longer length of stay of the patients, who in relation to their psycho-physical state may in some cases also find permanent accommodation there.

Ten years ago, healthcare real estate in Europe was considered a niche market. Since 2015, investments have increased; institutional investors have increased the liquidity of the market with EUR 6-8 billion per year.

Looking instead at Italy, historically RSAs have been owned directly by managers, and the RSA real estate market has only been developing for a few years, thanks to the attractiveness of the returns offered for this type of real estate investment and the guaranteed income offered by the systems of agreements with the public administration, in particular local health authorities.

The RSA – real estate combination

Halfway between a classic real estate investment and an investment in infrastructures (so-called real assets), that in RSAs is certainly a type that has seen an increase in capital of institutional origin, which is guaranteed sustainable cash flows in the long term and unrelated to the economy in general (since the social-health activity has a time constancy in the need for services from its own users, independent of economic cycles), with a low level of risk and being able to offer, among other things, an opportunity to invest in activities of a social nature.

In Italy, as mentioned above, as well as in France and Germany, the health system in fact covers, through agreements, the payment of the in-patient fees of the patients, leaving a residual share, of what in jargon are called ‘solvents’, to the private sector.

Another characteristic of real estate investments in this asset class is that it suffers little from yield differentiation based on geographic location. In fact, the main driver that determines the price/yield quotient in an RSA facility is the preponderance of places affiliated with the local health system out of the facility’s total authorised places, not so much where the facility is located. Another discriminating element of the price/performance quotient is the updating of the facilities, their state of maintenance and the availability of modern internal equipment.

On average, the gross rate of return at which an RSA facility with a significant share of places affiliated with local health authorities is purchased today varies between 5.50 and 7.5 per cent.

The future

The future of this real estate asset class will undoubtedly be characterised by strong investment growth, which will have to meet the growing demand associated with an ageing population.

Operators estimate that, depending on the scenarios and the need for nursing home beds, investments in new facilities of EUR 15 billion will be made between now and 2035, according to the most conservative scenario, or up to EUR 23 billion according to the most optimistic scenario.

Of all European countries, Italy is certainly the country that most needs to make up for a high gap between supply and demand, having only 4,000 RSAs with 200,000 beds.

Among the countries of the Old Continent, certainly the most advanced in these investments is Germany with over 12,000 facilities and about 876,000 beds, followed by France with 10,500 facilities and 720,000 beds, then Spain with about 5,400 facilities and 373,000 beds.