Guy Hands lost the chance to sell an £8 billion ($9.6 billion) UK military estate this year, according to his lawyers, after defense officials fretted about his possible profits.
(Bloomberg) — Guy Hands lost the chance to sell an £8 billion ($9.6 billion) UK military estate this year, according to his lawyers, after defense officials fretted about his possible profits.
Government plans to unwind a costly privatization deal with the private equity chief are in focus at a London judicial review, where a judge is set to examine the circumstances leading up to the potential sale of the soldiers’ quarters.
The private equity chief, whose Terra Firma Capital Partners controls the portfolio of tens of thousands of homes, had been holding talks with potential buyers and investors, according to a legal filing. But those plans have since been upended.
“The opportunity to complete a sale in 2022 has now been lost,” Monica Carss-Frisk, a lawyer for the Terra Firma-backed company Annington Property Ltd., said in a filing ahead of the week-long court process.
Annington is challenging the proposals to break a 200-year sale and leaseback agreement on some 55,000 homes. Buying back the estate would create better value for money for taxpayers, the Ministry of Defence said in its legal filings. The ministry is pursuing a series of test cases before deciding whether to push for a sale of the whole estate.
In the run-up to the move, MOD officials fretted that a potential sale of the portfolio would be a lot harder if Terra Firma was no longer the owner, according to a series of emails revealed in the court case.
“A scenario in which MOD waited for Guy Hands to crystallize a very significant profit, walk away, and then MOD decided to exercise its rights against a new owner, (which may well be a socially responsible investor such a pension fund, or indeed shares might be publicly traded would be reputationally very damaging for MOD,” one official wrote.
Lawyers for the MOD said Defence Secretary Ben Wallace knew of the possibility of the sale and that he believed any potential buyer needed to be aware that the UK wanted to enforce a potential sale of some of the homes.
The Annington companies are “sophisticated commercial parties, who in fact had already identified” the risk of a forced sale, lawyers for the MOD said.
Annington has taken to court to try to block the sale arguing that the government has no right to make the move without their consent
The initial deal to sell the homes was “disastrous” the Parliament’s Public Accounts Committee said in 2019, given the ministry pays Annington millions of pounds a year in rent for the houses it leases. The National Audit Office estimated that the department is between £2.2 billion and £4.2 billion worse off since the 1996 deal, mostly due to soaring house prices.
Court documents from last year revealed the estate is worth £8 billion.
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