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Macc Care Bond


7.0% p.a. fixed interest

Interest will be compounded quarterly and paid at the end of the term.


Up to 24 months

The borrower can repay any time after 18 months, including all interest accrued to that date.


64% LTV

Loan-to-value is estimated at 64% on day one.


Bond closed

This bond is now closed.

About this investment

This is an opportunity to earn a fixed interest rate by supporting the acquisition of a circa one acre site with planning permission, and fund the development of a modern, 65-bed purpose-built elderly residential care home in a large village in the West Midlands as part of the Macc Care Group. The bond will benefit from first charge security over the land and development as it progresses and the business once trading.

Downing believes the area has a significant shortfall of beds, particularly for elderly residents with requirements for nursing and constant care. In addition, we believe the home will be able to attract the requisite resident fee rates and staff.


What do I need to know?

  • Where will the money be invested?

    The first tranche of £1 million was used to acquire the site and begin the development. The site is located in a predominately residential area with local community amenities and is being purchased with the appropriate planning permissions in place.

    Since then a further £3.8 million has be raised and deployed into the construction and development of the residential care home.

  • Who's the team behind the bond?

    The team have over 15 years experience in the industry and currently operate eight care homes with more than 500 beds across the UK. They are well-established in the West Midlands having made a number of previous investments in the area.

    Downing has an existing relationship with the developer, having financed previous care home projects. We believe this team is a high quality operator that has demonstrated an ability to deliver high-quality care with strong regulatory compliance and that this is an exciting opportunity to build on our existing relationship.

    Downing has extensive knowledge of the care home sector, having invested in its first care home in 1998. Alongside other management teams we have built up three successful care home portfolios since 2012. The bond platform has been pivotal in supporting the growth of these portfolios.

  • Why invest in care homes?

    1. Aging demographic

    In more developed and affluent countries the numbers of elderly population and retirees has been growing steadily and this is set to continue. The UK is no exception to this. Over the last 40 years, life expectancy has improved by over nine years for males and over six years for females reaching 79.3 and 82.9 respectively in 2018.1 However, healthy-life expectancy has not seen the same level of improvement. ONS data puts healthy-life expectancy at 63.1 years and 63.6 for males and females respectively.1

    The percentage of pensioners to the rest of the population has been increasing steadily since the 1980’s. The Office for National Statistics projected that in 50 years’ time there is going to be an additional 8.2 million people ages 65 years and over in the UK - a population roughly the size of present-day London.2

    2. Wealthier aging population

    There is a growing wealth divide between generations. Older generations are growing richer while younger ones are becoming less wealthy.3

    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’. Whilst 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.4

    Through investing in elderly care homes, our product is automatically targeting the wealthier aging 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 aging population, means there is an increasing demand for premium private care. It is forecast that an additional 358,000 elderly people will require full-time care by 2038, meaning an extra 18,000 beds per year will be demanded over the next 20 years. 6,502 new beds were built across the UK in 2018/19 but 6,459 beds were removed. This extreme excess demand for care homes needs to be met with an equal supply.6

    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.7

  • What could my returns look like?

    You can earn a fixed interest rate of 7% p.a. on the bond. Interest will be calculated quarterly and the borrower has the option to pay or compound each quarter. Any interest that is compounded will be paid at the end of the term alongside capital. The bond matures after two years, although the borrower has the option to repay early after 18 months.

    The bond is eligible for investment through the Downing Innovative Finance ISA, which would mean that any interest paid on the bond would be tax free.

  • 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. Below are some of the risks, please see the offer document for more detail.

    • Capital is at risk -  The developer may not be able to repay the bond and / or interest at the end of the term. Repayment of the bond and interest is dependent on the developer completing the construction and selling the finished care home or refinancing the debt to effect an exit. Should the construction not complete or the home perform poorly it may not attract buyers or not provide sufficient income to allow for the developer to refinance and exit the 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.
    • This offer is higher risk than some other Downing bonds as the investment is secured on a single assetDevelopment 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 the 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?

    Short term

    There is undeniably going to be an impact on the care industry in the short term, as with many sectors of the economy.

    The care home market as a whole has seen a decline in occupancy through higher than normal mortality rates combined with reduced levels of enquires from prospective residents. In addition care home construction has seen some delays for completion and overrunning of costs.8

    Long term

    Although there has been excess mortality in 2020, Caterwood, a market leader in the healthcare advisory, suggests 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.9

    Knight Frank’s ‘UK Healthcare Property Market Overview Spring/Summer 2020’ states that the ‘long term fundamentals of this property sector will remain’. Care homes will still be in high demand to service the baby boomer generation and will still attract investors to the secure long-term income provided by the assets.8

    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.

  • Sources

    1 ONS, Health state life expectancies, UK, (2016-2018), December 2019.   

    2 ONS, Overview of the UK population, August 2019.

    3 The Telegraph, May 2019. 

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

    5 ONS, Total wealth in Great Britain: April to March 2018. 

    6 Knight Frank, elderly care homes closing at a time of surging demand, July 2019. 

    7 Knight Frank, European Healthcare 2020.

    8 Knight Frank, UK Healthcare Property  Market  Overview, Spring/Summer 2020. 

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

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