£2billion pay day bonanza after military homes sold back to Government

INVESTORS at one of Europe’s biggest private equity firms are set to pocket a £2billion New Year bonanza after selling thousands of military houses back to the Government in a bungled political scandal which has cost UK taxpayers billions in lost revenue.

On Thursday, the Ministry of Defence finalised its £6billion bid to buy back 36,347 military homes for married couples, which it sold to Annington Homes 28 years ago.

Buying these properties back will save the MoD an annual £230m – £600,000 per day – in rent. and the move was hailed by Defence Secretary John Healey for “showing that our government is determined to deliver homes fit for our heroes.”

Under the 1996 deal, brokered by former defence minister Michael Portillo and approved by PM John Major, military married quarters across the defence estate were sold to Annington Homes for £1.67billion, which equates to £4billion today – only for ministers to lease them back again to use for military accommodation.

At the helm was equity financier Guy Hands who, sources say, accurately forecasted the rise of property prices in the years ahead and steered Japanese bank Nomura towards the opportunity presented by the sale.

He created Annington Homes as a shell company and, when Nomura sold off the property portfolio in 2012, acquired both Annington and the properties with the help of investors through his firm Terra Firma Capital Partners.

Last week’s announcement netted them a cool £2billion.

But the 1996 deal was not without its controversies.

To begin with, while Annington has pocketed £4.3billion in rent since 1996, it has not required to maintain the properties. That job was let to the MoD which, when improvement were made, would often find that Annington raised the rent further.

Unfortunately, improvements were often not made.

At least two-thirds of current homes for service families are said to need “extensive refurbishment or rebuilding” to meet modern standards, the Commons defence committee concluded earlier this month.

Many are blighted with damp and mould, despite the Defence Infrastructure Organisation (DIO), which is responsible for maintaining and servicing military accommodation, being given £400m to tackle those issues.

And because the homes – some of which were built in the 1950s or 1960s – were no longer state-owned, they could not be demolished and replaced with properties more fit for purpose,

Now Mr Healey has persuaded PM Keir Starmer and Chancellor Rachel Reeves to spend almost £6 billion buying the houses back.

It follows successful High Court action to oblige a reluctant Annington to “enfranchise” the properties back into state hands.

The properties are said to currently hold a commercial value of £10​b​illion, and Government officials say that the purchase price of £5,994,500,000 represents “excellent value for money”.

In fact, when measured against money that would have had to be paid to Annington in future years, the purchases only cost the taxpayers an extra £1.7billion..

The announcement comes as the Government kickstarts work on a new military housing strategy, to be published next year.

Key principles will include a “generational renewal of Armed Forces accommodation” and new opportunities for forces homeownership.

Mr Healey said: “Our armed forces and their families make extraordinary sacrifices. It was shameful that, in the lead up to Christmas, too many military families were living with damp, mould and sub-standard homes – issues which have built up over the past decade.

“There is still a lot of work to do but this is a decisive break with the failed approach of the past and a major step forward on that journey.”

Ian Rylatt, Chief Executive Officer of Annington, said: “Over the past 28 years, Annington has been proud of its association with service families in the UK. We are similarly proud of our track record in refurbishing, redeveloping and returning surplus Married Quarters Estate properties to the national housing stock.

“We are pleased to have reached a definitive conclusion with the MOD that provides a fair and positive resolution for all parties involved. This deal represents a new chapter for the MQE and ends a costly and distracting legal dispute, allowing everyone to move forward.”