Guy Hands, the private equity tycoon, is exploring a £2.5bn bid for Quintain, the London-based property group, in an effort to establish an £8bn UK-wide real estate empire.
Sky News has learnt that Mr Hands' buyout firm, Terra Firma Capital Partners, is examining an offer for Quintain through Annington, the giant residential property group it has controlled since 2012.
Initial bids are due for Quintain, which is owned by Lone Star Funds, another private equity firm, early next month, and City sources expect a deluge of interest in it.
The company has planning permission for thousands of rental homes in the area around Wembley Stadium, with the development scheduled to be completed by 2024.
Buying Quintain would give Mr Hands a natural merger partner for Annington, which was created in 1996 to acquire more than 57,000 residential properties from the Ministry of Defence (MoD), most of which were then leased back to it on 200-year leases.
Today, the company owns roughly 40,000 homes, the majority of which are still leased to the MoD.
The original deal with Annington has been criticised by the National Audit Office for costing taxpayers £4.2bn more than expected, with rental charges to the MoD expected to rise sharply from 2021.
Mr Hands was the arcitect of that investment in 1996 during his earlier career at Nomura, the Japanese bank.
Annington is owned by a separate Terra Firma-run vehicle which has a number of external investors including an Abu Dhabi sovereign wealth fund.
Last year, Terra Firma secured a £4bn refinancing of Annington, raising £550m of new equity and £3.4bn of debt, in a move that paved the way for a push into the private rented sector.
Some analysts believe the company is now worth over £5.5bn and that an exit via a stock market listing could be easier for Mr Hands if Annington and Quintain were to merge.
It is unclear whether Terra Firma is separately exploring options for the future of Annington although people close to it believe that that is inevitable in the coming months even if Quintain does not form part of its future.
If Mr Hands were to succeed with a bid for Quintain, he would need to raise fresh funds from investors, even as he also attempts to buy a £1.2bn commercial property portfolio from Network Rail.
The tycoon has not raised a general buyout fund for a decade, having seen his stellar reputation tarnished by the financial implosion and eventual seizure of EMI Group, the music empire, from his grasp in 2011.
Last year, Terra Firma kicked off talks with pension funds and other investors about assembling a new $3bn fund, but doubts have begun to emerge in the City about whether such an ambition is achievable.
Mr Hands brought in Justin King, the former J Sainsbury (Other OTC: JSAIY - news) chief executive, and Andrew Geczy from Lloyds Banking Group to attract new investors and oversee an improvement in the operational performance of the companies it owns.
However, Four Seasons Health Care, the care homes operator, has effectively been removed from Terra Firma's ownership by the company's bondholders.
That investment has cost Terra Firma hundreds of millions of pounds, while this week it put Wyevale, the garden centre group, up for sale following a difficult period.
Mr Hands does expect to generate a healthy return from the disposals of RTR, an Italian solar energy business.
Sources said this weekend that Mr Hands' interest in Quintain was "at an early stage" and that he could yet decide not to lodge a formal offer for the company.
Spokesmen for Terra Firma and Annington declined to comment this weekend.