Nomura marches off with £730m from Army homes

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Guy Hands: He went to Heaven's Gate, then he bought the world

Nomura, the Japanese bank, is to take a £600m dividend out of Annington Homes, the company that bought the Ministry of Defence married quarters, giving it 323 per cent profit over the five years it has owned the estate.

A consortium led by Nomura paid £1.66bn for the 57,000-home estate in late 1996. The bank put only £226m into the deal and has taken £356m back from the sale of the properties. A further £600m comes this spring, a total profit of £730m. Nomura will raise a bond secured on the estate to get the money.

The Annington deal was one of the success stories of Nomura's Principal Finance Group, led by Guy Hands. Mr Hands left the bank last year with 70 staff and is in the midst of raising €3bn (£1.8bn) for a new buy-out fund, called Terra Firma Partners. Nomura has given Terra Firma the job of managing the assets bought for it by Mr Hands.

The profits made by Nomura from Annington have caused political ructions. The National Audit Office (NAO) attacked the deal, saying it would have been better had the then Secretary of State for Defence, Michael Portillo, halted the sale to Nomura. The NAO said taxpayers had lost £139m in the sale.

But since the Annington deal, the Ministry of Defence (MoD) has acquired a taste for bringing in the private sector to manage its assets.

Last year it launched two schemes – Project Connaught and Project Allenby – to redevelop its deteriorating Army barracks. The combined value of the deals exceeds £1bn. And The Independent on Sunday has learned that bidders are lining up for around £3bn worth of contracts to refurbish and maintain Army barracks and other MoD properties.

The first contract, to upgrade and maintain properties owned by the MoD in Scotland, is worth £440m over seven years. Four consortia are bidding for it, led by four companies: the nuclear-weapons- to-light-railways group Serco, Amec, the support services company, Bovis Lend Lease, the Australian construction outfit, and Carillion, the construction company. The bid awards are expected this year, and work starts next year.

Expressions of interest have also arrived for the South West region contract, worth £500m over seven years. A spokesperson would not reveal who the companies are.

Three contracts for the North, South-east and Eastern regions are up for tender, worth £750m, £650m and £550m respectively. Contracts for these deals are expected to be handed out in 2004.