Guy Hands’ Annington sells military housing for £6bn

(Bloomberg) — Guy Hands’ Annington Property Ltd. agreed to sell tens of thousands of military housing and related real estate to the British government for 6 billion pounds ($7.6 billion) after losing a test case last year. Block the sale of some of these products.

Annington agreed to sell its interest in the Married Quarters Estate, which includes about 36,000 properties and related real estate in England and Wales, according to a statement on Tuesday. The MoD said in a separate statement that the assets were currently valued at £10.1 billion, excluding leases.

The MoD said the deal would end “an arrangement in which taxpayers spend billions of pounds on rent for military housing while still being burdened with rising maintenance costs”.

In 1996, the Ministry of Defense sold a residential portfolio to Annington, now backed by Hands’ Terra Firma Capital Partners, for £1.7bn in a deal that cost the government heavily. The government subsequently rented out thousands of homes on long-term leases. When Annington wanted to buy back some of the properties, it launched a court case last year to block the move but ultimately lost, making it a test case for the government before deciding whether to move forward with selling the entire property.

Parliament’s Public Accounts Committee said in 2019 that the initial sale of the house was “disastrous” given that the ministry paid Annington millions of pounds a year in rent for the property. The National Audit Office estimates that the sector’s financial position has worsened by £2.2 billion to £4.2 billion since the 1996 deal, largely due to soaring house prices.

Read: Hands fail to stop UK unwinding £8bn ‘bad deal’

The ministry said in its legal filing that buying back the property would create better economics for taxpayers, while Annington argued the government had no authority to take the action without its consent.

The deal could save it around £230m a year in rent as part of the government’s new military housing strategy, which is expected to be published next year. It added that eliminating lease-related liabilities could create “budget headroom” to partially fund the purchase.

Annington said that upon completion of the transaction, all actual or potential claims between the parties relating to MQE will be resolved, adding that the exchange of contracts took place on December 16 and the transaction will close on January 9.

Annington said in a separate statement that it planned to use the proceeds from the sale to “reshape” its balance sheet and streamline debt.

—With assistance from Jonathan Browning.

(Updated background and use of proceeds.)

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