A property company linked to Guy Hands has agreed to sell 36,000 military homes to the UK’s Ministry of Defence for almost £6bn, signalling an end to a long-running battle between the billionaire and the government.
Annington will hand over its 999-year lease on the 36,347 homes, known as the Married Quarters Estate, to the MoD and receive £5.99bn in return – almost twice as much as Hands’ private equity company Terra Firma paid for Annington more than a decade ago, but less than the £8bn the homes were valued at last year.
The sale ends court proceedings brought by Annington over planned housing reforms. In September, the company took a legal fight with the UK government to the European court of human rights over fears it could lose significant sums as a result of the new Leasehold and Freehold Reform Act. It also launched a challenge in the high court on the same grounds.
In 1996, under the then defence secretary, Michael Portillo, the Conservative government sold 57,400 houses used by military service men and women and their families to Annington for £1.7bn – making the company the biggest residential property owner in England and Wales.
The MoD rented back the homes on a 200-year lease at a discount but also agreed to pay for their maintenance and refurbishment.
Annington refurbished and sold nearly 20,000 homes.
In 2012, Terra Firma bought Annington from the Japanese investment bank Nomura Holdings for £3.2bn. Hands, one of Britain’s highest-profile private equity investors, launched Terra Firma in 2002 and has since made more than £15bn in investments, including the record company EMI, Tilia Homes and Welcome Hotels.
In January 2022, the MoD said it was hoping to take back full ownership of the homes through enfranchisement rules under existing leasehold legislation.
The MoD said the deal brought back military housing into public hands and ended a “huge annual rental bill” to save about £230m a year.
John Healey, the defence secretary, said: “There is still a lot of work to do to deliver the homes our military families deserve, and these problems will not be fixed overnight. But this is a decisive break with the failed approach of the past and a major step forward on that journey.”
Ian Rylatt, the Annington chief executive, said the sale represented a new chapter for the estate and “ends a costly and distracting legal dispute, allowing everyone to move forward”.
Accommodation for service personnel and their families is “shocking”, as issues with damp and mould persist, according to a report from the Commons defence committee published last week.
It found that two-thirds of the homes for service families “need extensive refurbishment or rebuilding” along with a third of the homes rented by individuals. The family homes are part of the Annington portfolio, but the government is responsible for their maintenance.
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Last year, the Defence Infrastructure Organisation, which is responsible for maintaining and servicing military accommodation, was given £400m to tackle mould, damp and other problems.
The report found that its contracts resulted in “poor contractor performance, poor quality of maintenance and repair work, and a poor lived experience for many serving personnel and their families”.
The MoD will transfer 159 homes worth £55m to Annington within 12 months as part of a pre-existing agreement.
Contracts were exchanged in relation to the £5.99bn sale on Monday and the deal is expected to close on 9 January. The sale proceeds will be used to pay down Annington’s debt, with another portion distributed to shareholders, including UK pension funds and sovereign wealth funds.
The firm, which has 1,600 other rental properties, also plans to reinvest in the UK property market.
