* Expects purchase from Nomura to be completed this year
* Guy Hands has managed Annington portfolio for 15 yrs
* Annington has 40,000 properties, govt main tenant
LONDON, Nov 19 Dealmaker Guy Hands has rekindled
his love affair with British real estate after his buyout group
Terra Firma agreed to buy Annington Homes from Nomura
in a deal worth 3.2 billion pounds.
Hands, best known for the high profile loss of music group
EMI to Citigroup after the private equity investor
defaulted on its loans, was behind Nomura's purchase of
Annington in 1996 when he worked at the Japanese bank.
He has managed the investment on behalf of Nomura for the
last 15 years, 10 of those while at Terra Firma.
"(Annington) is a pure play UK residential property company
with a blue chip tenant on a lease of over 180 years and with
the ability to benefit from the strength of the property
market," Hands, chairman and chief investment officer of Terra
Firma, said in a statement.
Annington Homes became one of the largest private owners of
residential property in the UK when it purchased the Married
Quarters Estate from the Ministry of Defence (MoD). It leases
the majority of its 40,000 properties back to the MoD to provide
accommodation for service families.
The deal will have an enterprise value of 3.2 billion
pounds, made up of 1 billion pounds of new equity and debt
financing, and assumed existing debt of 2.2 billion pounds, the
The new debt financing will be in the form of a 500 million
pound Payment-In-Kind (PIK) bond, market sources told IFR, a
Thomson Reuters publication.
Terra Firma already owns Deutsche Annington, one of
Germany's largest real estate companies, which it could float on
the stock market late next year.
Deal-making in the private equity industry - once home to
conspicuous multi-billion deals such as KKR's 11 billion pound
acquisition of Alliance Boots and Terra Firma's 4 billion pound
purchase of EMI - has been tepid since the onset of the
In the absence of new deals, as bank lending for debt-heavy
leveraged buyouts has dried up, many firms have spent more of
their time buying mid-sized companies from rivals.
Terra Firma, whose last significant investment was the 825
million pounds purchase of care homes operator Four Seasons in
April, put plans to launch a buyout fund on ice earlier this
year after scant interest from its private equity investors.
It is also planning a multi-billion dollar fund with a
Chinese bank to invest in renewable energy.
That would focus its new investments on potentially safer
deals, after the firm lost 1.7 billion pounds of its own and
investors' money on EMI, which it bought in a highly-leveraged
deal at the peak of the buyouts boom in 2007.
But it could also offer lower-return deals than the industry
has targeted in the past.
Hands has been one a of a growing number of private equity
executives to warn that annual returns from private equity will
be lower than the 20 percent-plus which buyout houses promised
before debt markets seized up.
Terra Firma, meaning 'solid ground', has invested over 14
billion euros in 31 businesses with a total enterprise value of
over 45 billion euros since it was founded.
The acquisition of Annington, which Barclays is advising
Terra Firma on, is expected to be completed by the end of the