You could lose all of your money invested in these products.

These are high-risk investments and are much riskier than a savings account.

Care Homes

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Specialist team

7 investment professionals

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£18m

£18m raised through 5 bonds since 2017

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£200m

over £200m invested by the team from all Downing funds since 2012

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Track record

32 investments made and 15 exited since inception

Investing in care

As demand for long-term care in the UK is projected to increase, this sector offers attractive, asset-backed investment opportunities.   

An ageing demographic, a wealthier older population, long-term demand and robust property performance are several key drivers of the care home industry that make it an attractive industry to invest in.  

With a successful 10-year track record, Downing’s specialist Healthcare Development Capital team has invested over £200 million across 32 investments and exited 15 since it was established.  

The team has a time-tested approach and targets attractive returns with strong downside protection. 

Note that some care bonds are restricted to High Net Worth Individuals, Sophisticated and Professional investors only.

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What do I need to know?

  • Key drivers of the care home industry

    1. Ageing demographic 

    In more developed and affluent countries the number of elderly people and retirees has been growing steadily and is set to continue. The UK is no exception. Between 1980 and 2020, life expectancy has increased by over nine years for males and over six years for females, reaching 79 years and 82.9 years respectively.1 However, healthy-life expectancy has not seen the same level of improvement. ONS data puts healthy-life expectancy at 62.8 years for males and 63.6 years forfemales. 

    The percentage of pensioners to the rest of the population has been increasing steadily since the 1980s. The Office for National Statistics projected that in 50 years’ time there is going to be an additional 7.5 million people aged 65 years and over in the UK - a population roughly the size of present-day London.2 

    2. Wealthier ageing population  

    There is a growing wealth divide between generations. Older generations are growing richer while younger ones are becoming less wealthy. 

    Baby boomers, often known as the wealthiest generation, have reached this position through ‘soaring property prices, inheritance and the prevalence of final salary pension schemes’. 4 While the total wealth in the UK has increased on average by 51%, individuals between 25 and 54 have only seen their wealth increase by 9%, which is only a tenth of the increase enjoyed by the over 65s. 

    Through investing in elderly care homes, our product is automatically targeting the wealthier ageing population. Not only is there a rising need for care homes in older generations, but they can also afford them.  

    3. Long-term demand  

    On average in the UK, there is a relatively large disparity between people’s good health and their life expectancy, which creates a huge demand for care in a person’s later years. This, combined with the wealth concentration in the UK’s ageing population, means there is an increasing demand for premium private care. It is forecast that an additional 350,000 people will need elderly care by 2050, with a shortfall of 58,000 beds predicted by 2035. This extreme excess demand for care homes needs to be met with an equal supply.5  

    4. Robust property performance  

    Occupancy rates in care homes are among the highest of any property class, typically close to 90% with a constant stream of demand for beds. Private operators typically have pre-tax profit margins of 25- 35%. This is supported by increasing fee rates, high occupancy and an emerging number of efficiently run independent operators.6 

    Note that current care bonds are restricted to High Net Worth Individuals, Sophisticated and Professional investors only. 

     

    1 ONS, Health and life expectancies, UK, (2018-2020), January 2022.  

    2 ONS, Overview of the UK population, January 2021.  

    3 The Telegraph, May 2019.  

    4 Financial Times, one in five UK baby boomers are millionaires, January 2019.  

    5 Care Home Professional, Knight Frank predicts 30% rise in care home costs in 2022, Jan 2022  

    6 Knight Frank, European Healthcare 2020. 

  • Key facts

    Not available to every day or restricted investors 

    The Financial Conduct Authority (FCA) has restricted the promotion of some bonds to every day investors from 1 January 2020.  

    These rules apply only to what the FCA term 'speculative illiquid securities' (SIS). This basically means unlisted debentures or preference shares issued by a company that then uses the funds raised to lend to or invest in other companies or to purchase or develop property that is not for its own use. 

    Our current care bond offer is classed as a speculative illiquid security and therefore investment is restricted to High Net Worth, Sophisticated and Professional investors only.  

    You can find out more about the FCA ruling here.  

  • Who's the team behind the bond?

    The team is led by Mark Gross. Mark is a Partner at Downing LLP. With over 18 years of private equity experience, he has originated, transacted and managed over £1 billion of equity and debt capital. Since joining Downing in June 2014, Mark has worked across a number of sectors and has been spearheading the expansion of our healthcare activities and the wider development capital team. Consequently, the team have been recognised as Private Equity Investor of the Year at the HealthInvestor Awards 2020. 

    He has experience of investing in private and quoted companies with knowledge of operating businesses and real estate investment. Mark joined Downing from the UK mid-market private equity firm, Caird Capital LLP. Prior to that he performed principal investment and leveraged finance roles at Bank of Scotland. In 2021, Mark was recognised in HealthInvestor’s Power Fifty as one of the industry’s 50 most effective, inspiring and influential leaders across the health and social care market. 

    Mark is supported by a healthcare team consisting of: 

    Torsten Mack (Investment Director): Torsten joined Downing in January 2019 as Investment Director. He is responsible for deal origination and execution, with a particular focus on healthcare and education investment opportunities. Before joining Downing, Torsten was co-founder and Commercial Director of a specialist education business in the UK. Previous experience also includes Principal at BC Partners, Director of Corporate Development at the Priory Group and Associate in the real estate principal investment area of Goldman Sachs International. Torsten holds a BA in economics from Brown University. 

    John Pilbeam (Construction Director): John formally joined Downing as Construction Director in August 2016, having worked with the property team since 2014 on a consultancy basis. He is a chartered surveyor with a focus on property development project management. John has 30 years’ wide-ranging experience gained at partner level with two major surveying practices, and roles including Head of Construction (Europe) with AIG Global Real Estate, European Projects Director with Pyramid Hotel Group and Projects Director with Shore Energy. John works across Downing's asset-backed and energy investment teams to manage construction risk. He has a first-class honours degree in building surveying from the University of Reading. 

    Edmund Motley (Investment Associate Director): Edmund joined Downing in December 2021 as an Associate Director. He sits in the development capital investment team and is responsible for sourcing, evaluating and executing private equity deals, as well as ongoing portfolio management. Having qualified as a chartered accountant at Crowe, Edmund then worked at Terra Firma, Foresight Group and Chrystal Capital pursuing a range of asset-backed and growth capital investment strategies. 

    David Holland (Investment Manager): David joined Downing in March 2020. He works across the growth and development capital teams and is responsible for sourcing, evaluating and executing private equity and private credit deals, as well as managing a wide investment portfolio. He previously spent 6 years at PwC working across a variety of Private Equity roles, including Financial Due Diligence and, more recently, in M&A as one of the first hires into GP fund advisory and private capital fundraising. He is an ACA chartered accountant and holds an MA from the University of Cambridge. 

    Hannah Kenny (Investment Manager): Hannah joined Downing in November 2017 as part of the Property Finance team, where she focuses on deal execution. Before joining Downing, Hannah worked at Funding Circle as a Real Estate Support Specialist and has experience dealing with retail investors in customer services roles. 

    Michael Joseph (Investment Manager): Michael joined our investment team in January 2018 as an Investment Executive, focusing on asset-backed, growth capital and lending opportunities. Prior to joining Downing, he worked for PwC in their mergers and acquisitions team where he qualified as a Chartered Accountant in 2015. Michael holds a degree in economics and management from the University of Bristol. 

  • What are the risks?

    As with all investments, investing in a care home bond has risks that you should be aware of and comfortable with before you invest.  

    Capital is at risk – A company that issued a bond may not be able to repay the bond and / or interest at the end of the term. Repayment of the bond and interest can be dependent on the performance of a care home, the construction of a development site and subsequent operation and sale or refinancing being available to the company. Should any construction not complete or a home perform poorly it may not attract buyers or not provide sufficient income to allow for the company to refinance and exit any bond. 

    We recommended you spread your funds across a number of investments to diversify risk and not place too much capital in a single investment. 

    These bonds can be higher risk than some other Downing bonds as they are often secured on one or a limited number of asset.  

    Development and construction risk – There is a risk that development works could overrun on cost and / or time. Should this occur it could impact the borrower’s ability to repay any bond. 

    The Financial Services Compensation Scheme (FSCS) for deposits does not apply to Downing Bonds. There may be circumstances in which investors can claim up to £85,000 of compensation where Downing LLP is unable or unlikely to honour legally enforceable obligations against it (e.g. claims for fraud or misrepresentation). However, investors will not be able to claim under the FSCS simply because a bond fails to repay capital or pay interest. 

    For a full list of risks please see here. 

  • What are the risks due to COVID-19?

    Although there was excess mortality in 2020, Carterwood, a market leader in the healthcare advisory, suggested that COVID-19 may have acted as an accelerator, meaning that the mortality rate could be lower in 2021 and 2022. Caterwood also forecasts that care home occupancy should recover to pre-pandemic levels of 87.3% in England between July 2022 and October 2022, dependent upon death rate acceleration and recovery assumptions.7 They estimate that the low point of occupancy was at 78.8% in June 2020.8 

    Knight Frank's 'UK Healthcare Property Market Overview Winter 2021/22' states that 'The outbreaks of Covid-19 and the UK healthcare sector's response to such unprecedented circumstances has highlighted the continued resilience of and robustness of the sector.' It goes on to say that 'Covid-19 may indeed act to accelerate the closure of outdated homes and replace them with high-quality future proofed assets'. With the UK's over 65's set to reach 15.3 million by 2030 and 18.8 million by 2050, there will soon be a significant undersupply of beds continuing to underpin the demand for quality assets.9 

    We do not believe that the key drivers of the elderly residential care sector will be changed by COVID-19 in the long term; the age demographics, wealth concentration among the elderly, healthy life versus life expectancy and robust property performance are still fundamentals of the sector. 

    9 Carterwood Research, Short and long term impact of COVID-19, June 2020. 

    10 Carterwood, Light at the end of the tunnel, occupancy could return to pre-pandemic levels by Nov 2021, updated in April 2021 

    11 Knight Frank, UK Healthcare Property Market Overview, Winter 2021/22. 

We're here to help

To see what bond(s) are currently on offer please log in to your account, or if you are not yet a member of Downing Crowd you can sign up here

If you need any help or more information you can email us at crowdfunding@downing.co.uk, use the chat function or give us a call on 020 7416 7780.