DOWNING Crowd has launched a new £3m bond to fund the growth of care home developer Magnus Care Group.
The investment platform is offering investors a fixed return of seven per cent per annum, as well as the potential for added equity upside.
The loan reflects an estimated loan-to-cost (LTC) ratio of 90 per cent, and investors’ interest will be rolled up until 8 November 2020.
However, Julia Groves, head of Downing Crowd and partner at Downing LLP cautioned that due to the “complex” nature of the bond, it may only be suitable for sophisticated investors.
“This offer is more complex than our more standard bonds, therefore it’s likely to be better suited to more experienced and confident investors,” she said.
“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 per cent 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.”
Downing Crowd is offering investors an equity stake in Magnus Care Group, with shares allocated in proportion to each investment. According to Downing, this will allow investors to share in any potential upside in the business upon exit.
The investment platform has estimated that the combination of the bond’s fixed returns and the potential equity upside could generate an internal rate of return of around ten per cent. Downing Crowd has already raised more than £2.6m towards the bond.
“The Downing team has honed real expertise in the care sector, having invested in our first care home back in 1998,” added Groves. “Our success in this area of the market is also demonstrated through our recent exit from five care home projects in March 2018.”
Magnus Care Group previously used Downing funding to develop a portfolio of care homes and had a successful exit in Summer 2018 with higher than expected returns.
Magnus plans to work with Care Concern to acquire new residential care homes across the UK.
The funds will also be used to refurbish existing properties, enhance the standards of care and increase bed occupancy where appropriate.