Magnus Care Home Bond Series Two

Capital is at risk and returns are not guaranteed.

Fixed term Bonds are not readily realisable and investors should expect to hold them for the full term.

Bond + Equity
Asset-backed
IFISA eligible

7.0% p.a.

Fixed return

3 yrs 5 mths

Term (Up to)

Invest in Magnus Care Group, a company with a growing portfolio of residential care homes for the elderly. Earn 7% p.a. over a term of up to 3 years + 6 months, and earn a share of the potential profits on exit of the portfolio, giving a combined target IRR of 10%. Read more.

Raised: £4,245,640
Tranche 3 closes

Project

What is Magnus Care Group?

Downing, in collaboration with Care Concern’s management team, is backing Magnus Care Group (“Magnus Care”), a company seeking further finance to help grow their already four strong care home portfolio.

The Group acquires residential care homes and aims to create value through strategies such as operational improvements, increasing bed occupancy, extending properties and enhancing standards of care. At the end of the bond term Magnus Care aims to exit its portfolio through a refinance or sale and pay bondholders their capital, interest and share of the profits.

 

As at 15 May 2019, the portfolio consists of four assets:

  • Bothwell Castle, a newly developed, 75-bed care home in an affluent suburb of Glasgow, acquired in early November 2018.
  • Ridgeway Rise Care Home, new build 73-bed and acquired in March 2019, based in Swindon.
  • St Mark’s Care Centre, 62-bed, purpose built and acquired in March 2019, based in Sale.
  • Springvale Care Home, purpose-built 95-bed, acquired in March 2019, located in Glasgow.

 

In addition to the above acquisitions, Magnus has a strong pipeline of new sites with three future care home acquisitions expected to complete over the next few months.

 

Offer

This is an opportunity to earn an interest rate of 7% p.a. (6.5% + Bank of England base rate after 8 November 2021). Please note Magnus can opt to compound this interest in the period up until 30 May 2021.

Shares will be allocated in proportion to your bond investment, giving you the opportunity to receive an equity return should Magnus Care generate sufficient value on exit. The combined bonds and shares give an estimated internal rate of return (IRR) of c.10%. The actual IRR over the portfolio will vary due to a number of factors such as the timing, type and number of care homes acquired.

 

Security

The bonds are secured on a first-charge basis against the bricks and mortar of the care homes and Magnus Care’s other assets. The Loan to Cost ratio (LTC) over the portfolio of current homes, is 90%. This higher LTC increases the risk to your capital, therefore to compensate, you will receive a higher interest rate and a potential equity return. Should Magnus default on the Bond, Care Concern Management have entered into a contractual obligation to contribute an additional 5% of the total amount invested.

About

Our experience

Downing has specialised in asset-backed investments for over 20 years, managing over £290 million in such businesses as at 30 September 2018. Our knowledge within the care sector is extensive, having invested in our first care home in 1998. Since 2012 we’ve worked closely with Care Concern Group and, prior to building the Magnus portfolio together, we had invested in nine care home projects worth approximately £65 million. We completed a successful exit from five of these homes in March last year.

 

Why do we choose care homes?

The UK’s elderly population is growing, with men and women living nine and six years longer respectively than in 1980.1 Healthy-life expectancy is lagging behind general life expectancy, increasing the level and duration of care required.2 It is forecast that demand for care accommodation is set to increase by 9,000 beds a year, whereas the supply of new beds is only growing by 5,000-6,000 annually.3 In 2016, the first of the baby boomer generation turned 70. This generation owns more than half of Britain’s £11 trillion of wealth.4 The aging demographic combined with the concentration of wealth in the UK’s aging population indicates an increasing demand for and affordability of premium private care.

“The demographic demands of an aging population are widely recognised. We believe this backdrop creates a compelling opportunity for asset-backed investment. Downing has a longstanding, close relationship with Care Concern and believes Manpreet Johal’s team are high-quality operators that have demonstrated an ability to deliver high standards of care and regulatory performances in the markets they operate. We feel the portfolio and pipeline of care homes represent an excellent opportunity to earn strong asset backed returns if you are comfortable with the risk to your capital.” Mark Gross, Partner, Downing.

 

1 - Public Health England, Life Expectancy and Healthy Life Expectancy, July 2017 and Office for National Statistics, UK 2014 to 2016.

2 - Age UK, Later Life in the United Kingdom, November 2017.

3 - AMA Research, 19 October 2017

4 - Resolution Foundation, 20 June 2017