Downing Crowd has listed a £3 million bond for care home developer Magnus Care Group. The security offers investors an annual rate of return of 7% plus the potential for added equity upside. The bond has already raised more than £2.6 million.
Magnus recently acquired Bothwell Castle, a newly developed care home in a suburb of Glasgow. Magnus 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 bond will help fund their growth.
Downing says the bond has an estimated loan-to-cost (LTC) ratio of 90% and investors’ interest will be rolled up until 8 November 2020. As part of the offering, which is deemed better suited for more sophisticated investors, shares will be included in proportion to the debt investment. As the investment holds a higher level of risk, this entitles investors to a share in any potential upside in the business on exit.
The fixed return on the bond and the potential equity upside are estimated to generate an internal rate of return (IRR) of c. 10%, although the actual IRR will depend on the value of the company and the timing of the exit.
Downing said 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.
Julia Groves, Head of Downing Crowd and Partner at Downing LLP, issued a comment on the investment:
“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 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.”
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