Private equity tycoon Guy Hands is set to launch legal action against the Ministry of Defence this week as it seeks to unwind one of the biggest-ever privatisation deals.
Hands’ private equity firm, Terra Firma, this weekend accused the government of attempting to “renege” on its 200-year lease commitment for 38,000 MoD homes.
It said ministers were trying to “expropriate properties”. One investor said the government was behaving like a “rogue state”.
The MoD and UK Government Investments are exploring whether they can forcibly buy back Annington Homes, a portfolio of 57,400 military properties sold off by then-defence secretary Michael Portillo in 1996.
At the time, the housing market was still weak after the early-1990s recession. Japanese bank Nomura paid £1.7bn for Annington. Hands was part of the Nomura team. He then bought Annington from his former employer on behalf of US and Middle Eastern investors advised by Terra Firma, for £3.2bn in 2012.
The portfolio is now valued at about £7.6bn. The MoD pays £183m a year in rent and is responsible for the maintenance of 38,000 homes it still leases. The 1996 sale was heavily criticised by the National Audit Office.
Last week, defence procurement minister Jeremy Quin said the government would explore whether it could ease leasehold enfranchisement rights to buy back the homes.
Hands is understood to be preparing to send the MoD a pre-action claim this week.
