Press release | 29 January 2019

Downing Crowd launches £3m care home bond + equity

Investment platform Downing Crowd has launched a new £3 million bond for care home developer Magnus Care Group, who are also supported by experienced care home operator Care Concern. The bond will offer investors an attractive fixed return of 7% p.a. plus the potential for added equity upside, and has already raised more than £2.6 million.

The Magnus Care Group Bond has an estimated loan-to-cost (LTC) ratio of 90% and to allow the business to invest in its growth, Downing investors’ interest will be rolled up until 8 November 2020 – so it is likely to be appropriate for more sophisticated investors. To reward investors for taking on a higher level of risk, they will be given shares in proportion to their debt investment. This entitles investors to a share in any potential upside in the business on exit.

Bothwell Care Home

The fixed return on the bond and the potential equity upside are estimated to generate an internal rate of return (IRR) of c. 10%1, although the actual IRR will depend on the value of the company and the timing of the exit.

The bond will also be secured on a first-charge basis against the bricks and mortar of the care homes in the portfolio and Magnus’ other assets.

More about Magnus Care Group

Having recently acquired Bothwell Castle, a newly developed care home in an affluent suburb of Glasgow, Magnus Care Group plans to work with Care Concern to acquire further resident care homes to build out its portfolio and two additional locations are in the pipeline. Throughout this process, Magnus Care Group will focus on refurbishing properties, enhancing standards of care and increasing bed occupancy where appropriate.

The team behind Magnus Care Group previously developed a portfolio of care homes with Downing managed funds and had a successful exit in Summer 2018, achieving returns well in excess of expectations.

Julia Groves, Head of Downing Crowd and Partner at Downing LLP, said:

“The Downing team has honed real expertise in the care sector, having invested in our first care home back in 1998. Our success in this area of the market is also demonstrated through our recent exit from five care home projects in March 2018.

“This offer is more complex than our more standard bonds, therefore it’s likely to be better suited to more experienced and confident investors. Although past performance is a not a reliable indicator of future performance, a key reason why Downing is happy to list a bond with a 90% LTC is the strong track record of Magnus’ management team combined with the controls that Downing LLP, as security trustee, has in place. All of this gives us confidence that the bond can provide generous rewards for investors who are able to take on additional risk.”

  • 1 Source: This is based on Downing’s internal calculations and assumptions.