British government pays £6 billion to end privatization of military housing

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The British government will pay property group Annington nearly £6 billion to buy back about 36,000 properties in a military housing estate, ending a legal battle over one of the country’s most controversial privatization deals.

The Ministry of Defense said on Tuesday it had agreed terms to take back military homes sold for £1.7bn in recent years from John Major’s Conservative government.

The deal ends an arduous privatization process that lasted nearly 30 years, with a complex system of lease contracts that led to multiple court proceedings and burdened the government with billions of pounds in rental and maintenance costs.

Defense Secretary John Healey said: “Today one of the worst government deals ever comes to an end,” describing it as “an appalling deal struck in 1996 just before the election when ministers were….” . He conducted a fire sale of defense houses.”

Healey said the government would seize a “once in a generation” opportunity to improve the quality of homes for military service personnel and their families, and improve the use of MoD land to advance the government’s wider housebuilding agenda.

The so-called Married Quarters Estate was privatized in the 1990s under a long-term lease to Annington. But the government Recently sought Reclaiming ownership of assets, leading to Legal dispute with The real estate company is owned by private equity group Terra Firma, which was founded by billionaire Jay Hands.

Annington said the deal would put “an end to all ongoing litigation.”

hands, a A prolific and colorful deal makerpassed leadership of Terra Firma to his son Richard last year, but remains a shareholder. He was also part of the team that closed the original 1996 deal for Nomura, which sold Annington to Terra Firma in 2012.

Under the 1996 agreement, Annington received a 999-year lease on about 55,000 properties. The Ministry of Defense then rented the homes for a shorter period and at a discounted rate, agreeing to bear the costs of renovation and maintenance.

Annington also exercised its rights under that deal to sell thousands of units that the Army no longer needed over the years.

The MoD said taxpayers ended up £8bn worse off from the privatization, based on the rent it paid and the value of about 18,000 homes it gave up. She added that the buyback would save £230 million in rent each year.

The MoD added that the deal “will bring an end to an arrangement that has seen taxpayers spend billions of pounds on military housing rent payments while remaining responsible for high maintenance costs.”

The price paid for the property represents a 13.5 percent discount from the fair value of the properties in March 2024, according to the real estate company’s annual report.

Ian Rylatt, chief executive of Annington, said the company had agreed to the deal to end a “costly and distracting legal dispute”. On Tuesday it also made an offer to bondholders to reduce its £3.7bn debt pile by redeeming some bonds.

James Cartledge, Conservative Defense Secretary, welcomed the agreement and said negotiations had begun under the previous government. He said the apparently large initial cost was “broadly offset” by removing long-term annual costs from the government’s books.

He added: “The real win is that instead of spending huge sums on plaster for troop housing, we can rebuild it as part of what may become the most exciting renovation project in modern history.”

The Department of Defense in late 2022 began a process to regain control of the properties through liens, which allow tenants to repossess properties at a court-approved value, which Annington has opposed.

The Supreme Court last year upheld the government’s decision to cancel the 1996 agreement, which Annington appealed. A hearing was scheduled for July, and the parties agreed not to proceed with it in order to explore a possible solution outside of court.

The property group separately sued the Conservative government last year to challenge its new lease reform legislation.