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Lichfield District Council’s new property investment strategy to cost £3million over the next year

The bill for a a new property investment strategy at Lichfield District Council is expected to cost around £3million in the next year.

The offices of Lichfield District Council. Pic: Lichfield District Council

The offices of Lichfield District Council. Pic: Lichfield District Council

The local authority has drawn up plans for a new property investment company to be created.

Cllr Mike Wilcox, leader of Lichfield District Council said that the new strategy would help close a funding gap due to a reduction in the money it receives from Government.

He also said the proposals would help create “much-needed” affordable housing in the area.

But the plans have been criticised by the Labour opposition group, whose leader Sue Woodward said the scheme had been rushed through in “an attempt to hide Conservative embarrassment over the failure of their Friarsgate project”.

The new report, to be heard at a meeting of the council’s audit and member standards committee on Wednesday (14th November), revealed that the new property investment strategy was progressing.

“At present the council is in the process of recruiting an estates management team that will be integral to the delivery of this strategy,” the report said.

“As a consequence it is prudent to assume that £3million of the £6million budget will be spent in 2018/19.”

Cllr Mike Wilcox, leader of the council, said the money would help create a solid and more secure future.

“With the increasing pressure on our budget, as a result of significant decreases in government funding, it can no longer be business as usual,” he said.

“We need to transform and find new and innovative ways of working and raising income if we want to continue to provide good quality services to our residents.

“The council agreed late last year to consider investing in property to help provide income that will safeguard council services and support our local economy. This is an approach being practiced by many others and we have sought advice from them to inform our own approach.

“It’s a really exciting time for the council and, with careful management and prudent investment, we are confident we can put the building blocks in place for a longer term more secure future.”

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  1. Nodge

    13th November, 2018 at 10:35 am

    Let’s hope it doesn’t go horribly, horribly wrong.

    Which it will of course.

    But no bother, it’s not their money afterall.

  2. brian pretty

    13th November, 2018 at 10:50 am

    which planet are they on

  3. Dawn

    13th November, 2018 at 11:41 am

    “It’s a really exciting time for the council and, with careful management and prudent investment, we are confident we can put the building blocks in place for a longer term more secure future.”

    Where have we heard this one before…let me think. Perhaps I should go back, collect a few gems of Cllr Wilcox’s re: Friarsgate and remind him of just how confident he was then and then maybe he would come on here and tell us why we should have confidence in his word.

    You can’t continually blag your way through office councillor and expect the people to trust you, remember it’s earned and you have run out of chances chancer.

  4. LetsGiveItASpin

    13th November, 2018 at 1:02 pm

    Here we go again , friarsgate being used as a weapon to further increase the officers powers.. all of this is down to the officers empire building to save their jobs and gold plated pensions. Anyone with half a sense knows that the SMT and Cabinet are incapable of leading property projects … yet they continue to dabble and play the property game. This is nothing but about power struggles and internal power gain

  5. John Griffin

    13th November, 2018 at 1:55 pm

    Brian Pretty you have done far more for Lichfield than Wilcox. Pity people with genuine ideas and drive are absent from the ruling party, indeed in many cases absent from representation.

  6. Joanne Grange

    14th November, 2018 at 12:23 pm

    I’m pretty intrigued by this, so I did some sums (I’m a finance person, I can’t stop myself…) to work out how this would help the council’s position.

    There are a number of things to consider is working out how much return we should expect on £3m to make this a worthwhile thing to pursue.

    For starters, there’s the cost of capital itself. At the 20 year UK gilt rate (the accepted measure of risk free returns), the £3m investment would need to contribute 1.9% or £57k.

    Then there are the staff costs to cover. For 3 staff (which we’ve seen them looking for on other threads) at an average salary of £30k (which is a prudent estimate given the job ads we’ve seen), the £3m investment would probably need to contribute an absolute minimum of £125k to also take into account employer’s NI, pension and other employment costs. Then there are the costs of running the company to also take into account (audit, systems, legals, tax advice etc etc) so we can probably add another £25k of costs which would need to be borne in mind.

    So before we even start to think about risk premia and generating any sort of return, the £3m investment needs to generate £207k. This equates to a risk free, pre-tax return of 6.9%, or a risk-free post tax return of 8.5% – this is relevant as this will be a separate company so subject to corporate tax.

    For property transactions, a risk premia of 3% is probably too low, but we’ll use it for this discussion, and then if Cllr Wilcox actually wants to generate some cash to contribute to closing the funding gap we’d probably need an extra 3% minimum to make it worthwhile (again, probably too low for a real situation), so I’d suggest that before this is a sensible use of our money Cllr Wilcox cannot possibly accept a return of less than 14.5% on the £3m.

    14.5% on £3m is a quite spectacular return from a standing start with no experience. It’ll be interesting to see how this can be delivered….

  7. Joanne Grange

    14th November, 2018 at 12:33 pm

    And yes, I got my pre-tax and post-tax the wrong way round! It’s been a long day already….

  8. John Griffiin

    14th November, 2018 at 5:23 pm

    Ms Grange, perhaps the news that Oliver Letwin is pushing for changed development rules, to enable councils to set themselves up as development corporations, to fast-track developments over 1500 houses big, is a factor behind this move. Mind you, you wouldn’t get 1500 on Friarsgate, but you might elsewhere. Especially when you know facilitators to link with established public/private providers.

  9. Joanne Grange

    15th November, 2018 at 3:03 pm

    Indeed! And then link that to LDC cooperating with Birmingham to take up their inability to deliver their required number of new houses and before you know it Lichfield will be a suburb of the greater Birmingham area through packing those houses into every patch of green space in between here and the Bullring. It’s all rather depressing. I still don’t see how this can be called “careful management and prudent investment” as claimed by Cllr Wilcox though. If it’s houses for resale, the availability of mortgages is a key requirement and mortgage lending is at its lowest level for years, and if it’s houses for rent a 14.5% yield would most likely not be achievable.