Magnus Care Home Bond

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

4 yrs

Term (Up to)

Invest in Magnus Care Group, a company focused on developing residential care homes for the elderly. Earn 7% p.a. over a 4 year term, and a share of the potential upside on exit - giving a combined target IRR of 10%. Read more.

Raised: £2,530,503
Tranche 1 closes

Project

Downing and Care Concern’s management team are backing Magnus Care Group (“Magnus Care”), a group seeking to raise finance to help build their care home portfolio.

Magnus Care acquired Bothwell Castle, a newly developed care home in an affluent suburb of Glasgow, in early November 2018. The group plans to acquire residential care homes to build a portfolio, and create value through strategies such as operational improvements, increasing bed occupancy, extending and refurbishing properties and enhancing standards of care. Building on Bothwell, Magnus Care is in advanced stages of two further care home acquisitions and is pursuing a pipeline of further opportunities. At the end of the bond term Magnus Care aims to exit its portfolio, through a refinance or sale, to pay bondholders their capital and realise value for its shareholders.

Earn an interest rate of 7% p.a. with interest rolled-up up to the period of 8 November 2020 to allow time for the company to establish itself. The interest rate from 8 November 2021 will be adjusted to the Bank of England base rate plus 6.5% (based on BoE base rate as at 16 December 2018 this would equate to an interest rate of 7.25% p.a.). 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, including the two homes completing, is expected to be around 90%. This higher LTC in comparison to previous opportunities offered by Downing increases the risk to your capital. To compensate, you receive a higher interest rate and a potential equity return increasing your overall potential return.

Bond + equity offer

Shares will be given to you in proportion to your bond investment, and you will receive an equity return should Magnus Care generate sufficient value on exit of the portfolio.

The bonds and shares combined give an estimated internal rate of return (IRR) of c.10% across the portfolio which includes Bothwell and the two homes soon to be acquired. The actual IRR over the portfolio will vary due to a number of factors such as the timing, type, number and trading performance of the care homes acquired. See more on IRR at our FAQ page.

About

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 Bothwell and the anticipated wider portfolio 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.

Downing has specialised in asset-backed investments for over 20 years, currently managing over £290 million in such businesses. 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 investing in nine care home projects worth approximately £65 million. We completed a successful exit from five of these homes in March this year.

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