Mareel’s future guaranteed as SIC agrees 99-year lease for £1.1m
Neil RiddellMareel’s future as a cinema and music venue is safe after the SIC agreed to purchase a 99-year “long lease” on the building for £1.1 million.
Councillors unanimously agreed the package following a private meeting lasting more than an hour on Wednesday afternoon. It follows months of behind-the-scenes talks and no little frustration, and takes the council’s contribution to the project up to £7.25 million since 2006.
In effect, the council has leased the building from Shetland Arts for a year shy of a century, then leased it straight back to the arts agency. Shetland Arts will remain responsible for the building’s maintenance.
SIC members had previously agreed a “bridging facility” of up to £600,000 to protect its investment in Mareel. That rescued Shetland Arts from a perilous situation after the building opened 18 months late and over budget.
Council political leader Gary Robinson said the deal “rules out any ongoing subsidy from the SIC” towards Mareel’s running costs. Every penny Shetland Arts had accessed from the council since December has been repaid in full, with interest, he added.
Mr Robinson said Shetland Arts now had “no outstanding debts to the council”. It is “a sub-tenant of the council and can continue to operate the flagship cultural centre on the Lerwick waterfront”, an SIC statement read.
On Friday the council will meet with Shetland Arts and Mareel’s other funders, including Creative Scotland and HIE, to discuss “affordable ways to provide artistic and cultural events for the Shetland community in the future”.
Shetland Arts chairman Danus Skene said trustees were “entirely happy” with the decision, adding he hoped ongoing legal wrangles with contractors DITT could be resolved shortly.
“I would hope certain realities dawn so that lawyers don’t make too much money,” he said.
Mr Robinson accepted public criticism was all but inevitable given the council is in the thick of making huge spending cuts. But he said not a single councillor had sought to block the £1.1 million deal.
While he and others would “much rather not have to contribute any more” to the project, “it would be absolutely mad to think about turning our back” when such a large public investment was at stake.
“I’m pleased and relieved that our capital investment in Mareel is now secure,” Mr Robinson said, “as well as all the public money we and our partners have put into the project, a total of almost £14 million.
“Councillors are still under unprecedented pressure to cut budgets, and I know many folk were uneasy about the possible outcome of negotiations… and maybe feared there’d be an open-ended council subsidy.
“There won’t be, but I’m hopeful that we and the other funders can now find a way to achieve long-term security for Mareel, into which so much public money has been invested.”
Mr Robinson added that, having been an outspoken Mareel critic, he was happy to “hold my hand up and say I got it completely wrong, for example, on the cinema, which has far outperformed anybody’s expectations”.
He said the two-screen cinema was selling twice the number of tickets Orkney’s Phoenix Cinema was, demonstrating “underlying public support” for Mareel.
Mr Skene spoke of his relief that councillors, who “going back to December and February were really quite wobbly about support for the project”, had now “forked out in effect their share of the last leg of the capital project and secured a heritable asset in return”.
Speaking from Edinburgh, where Mareel is up for an award at architecture body RIAS’s 2013 ceremony, Mr Skene paid tribute to the work of council officials Jan Riise and Christine Ferguson. They have devised a “complex solution that satisfies the political reservations of the council”.
Mr Skene said the agreement ensured Mareel would be used for its intended purpose for at least 25 years and “probably indefinitely”.
An independent valuer set the lease value at £1.1 million, and in 2038 the council will have the option of buying the building outright “for a small sum”, he explained.
The agreed sum covers the cost of a “due diligence” review carried out at the end of 2012. It was followed by a series of private negotiations, and today’s announcement puts an end to months of speculation and uncertainty.
Mr Skene said Shetland Arts’ financial situation had been complicated by the delays. That resulted in a “conflation” of capital and revenue spending which have since had to be disentangled.
Until now Shetland Arts paid the SIC to do its payroll, and last summer’s problems meant it ended up owing the council money for staff wages.
“All those items are taken account of in this arithmetic,” Mr Skene said. “[Mareel’s capital cost] has been confused in recent months by this settling of the wages situation, and by the fact that, last summer, to get the building open we used revenue money to buy things which were in effect capital [such as] furnishings and equipment in the building.”
The organisation’s provisional figures suggest that, excluding one-off construction issues, Mareel should not require any subsidy over and above its annual grants from the charitable trust and Creative Scotland.
“It will certainly be a profit on operations,” Mr Skene said. “But there have been so many unusual factors concerned with the capital project… that I wouldn’t like to guarantee a declared profit by the business in the first year.”
He admitted aspects of how the building was run had been “a bit harem scarem” in the last few months.
Does he envisage significant changes? “There won’t be a revolution tomorrow morning. You have to bear in mind that a small organisation that sat in an office at the Toll Clock and was 70 per cent dependent on grants is now a social enterprise only 40 per cent dependent on grants.
“My concern as chairman is to get a normalisation of that, to get systems to settle down, budgeting to work, and start generating new income streams.”
Susan Jolly
And just how much rent are Shetland Arts paying? So basically, the SIC can afford £1.1 million but can’t afford to write that (tiny?) amount off the total sum due for the Housing debt? How about asking council tenants if they would prefer a lower rent increase or bail out Mareel? The whole thing stinks and just confirms what some people were thinking and said all along.
ian tinkler
SIC political leader Gary Robinson said it would have been “mad” to have walked away after investing over £6 million.
SIC political leader Gary Robinson: it would have been “mad” to have walked away having invested £6 million.
Spence Jamieson
The deal structured for this creative arts centre looks like creative accounting to me. It’s a shame these creative minds cannot find ways to overcome the cuts that are being implemented.
Johan Adamson
Im not sure it has gone from 70% grant funded to 40%, and I think I would dispute that. Sure there is now additional income but there is also additional expenses. It will be good to get Mareel sorted so that SADA can get on with the job of Arts Development now
Hazel Spence
Well the SIC have now confirmed what we all saw happenning a while back. Our councillors were voted in to represent us so why is all meetings behind closed doors? Deceptive and infuriating. Cutting PUBLIC toilets, PUBLIC services and RURAL Schools and then pump more PUBLIC money into a ‘flag(sinking)ship cultural centre on the Lerwick waterfront’.
I hope all Councillors go down with her and be made accountable for their decisions. Next time my vote will be no confidence. It is a good job Central Mainland has readily available access to skips.
stephen shirmer
What ever way you cut this deal with this Mareel project it is a bottomless financial pit that will just waste money year after year which could of been better spent.
David Spence
“I would hope certain realities dawn so that lawyers don’t make too much money,” he said.
I find it amusing how Danus Skene goes on about Lawyers making too much money, when practically in every aspect of our lives which involves the law, lawyer’s or solicitors are the only people who benefit no matter what representation they are.
Is our legal system value for money? Most certainly not by a long chalk.
It is because of the greed oriented legal system that prevents many, many people getting proper justice and fairness in our society due to the biggest rooks (what disturbing irony) in society (after the banks) demanding their biggest piece of the pie for the very much over charged service ‘ they allegedly provide ‘.
If they paid more attention to their principles and ethics in providing a proper justice system instead of their greed orientated eyes bulging with pounds signs maybe our society would be far better off.
Michael Burns
“Mareel’s future as a cinema and music venue is safe after the SIC agreed to purchase a 99-year “long lease” on the building for £1.1 million.”
Surely this is only true if Mareel can guarantee to return a profit. What happens if it fails to cover its running costs, including, I hope, a fair market rent being paid to SIC.
John Tulloch
You could get three Mareels or six times the SIC’s actual investment in it for the £40M the SIC is trying to recover from the government with help from the Shetland Times petition.
Have all the Mareel supporters – and detractors – signed the petition (I know Ian T. Has signed)?
David Spence
As a musician myself, I have to say that a place like Mareel should have done years and years ago……..better late than never some may say……..but given the drastic cuts this Council is doing, one must question the validity of this 99 year lease (may be by then we can give it to the chinese lol) and whether or not (why does this remind me of another financial draining scheme called the VE Project lol) Shetland will get value for money and recoup what has been spent?
In principle I support Mareel, as a place like this is long over due in regards to Shetlands strong musical background and traditions where, hopefully, this can be brought to the forefront in all aspects of musical entertainment.
I do hope that Mareel can live upto it’s expectations in promoting, developing and nurturing the musical skills and talents the people of Shetland have without greed and profit taking precedence over and subsequently killing any chance of Shetland’s traditional music being promoted and developed within the islands itself as well as further afield.
I know people will say ‘ You cannot run Mareel or a business without making a profit ‘, never a truer word said………..but profit should not necessarily have the final say in keeping alive the traditions, cultural identities and musical skills and talents Shetland is renowned for.
In many cases, it is this (greed and profit) which has killed off many skills and talents Britain used to have and is being replaced with cheap, substandard, poor quality products, services and music (mass produced utter rubbish called boy/girl bands/britains got talent (only singing though) X Factor etc etc who are musically talentless……but hey, as long as the record producers dictate what rubbish we are forced to listen too)
S V Jolly
@ John Tulloch – forget for a moment about getting money off the Government for the housing debt and how about you answer this: a) bail out Mareel or b) lower rent increase to Council Tenants? No flannel, just a straightforward reply a) or b) if you could manage it – I suspect you can’t so go on, prove me wrong.
£1.1 million for 99 years – wow, that’s cheap rent, isn’t it? Work that out per month. Just what amount of rent per month are Shetland Arts paying the SIC then? What would a going market rent be? More than £1,000 a month at least. Indulge us, SIC and/or Shetland Arts, how much per sq ft/per sq m? Or is the building maintenance costs in lieu of rent? Now it may well be that this was the only way the SIC investment could be protected (at least Creative Scotland were savvy enough to protect their interests) but Shetland Arts should still be charged a rent on par with the open market rentable value. Any upward only rent reviews? What happens if Shetland Arts fail to maintain the building, they get booted out for breach? And will it still be standing in 99 years?
Actually, John Tulloch, would you sign a petition demanding full disclosure of the recent investigations and meetings, with all parties involved waiving their legal rights under Data Protection/various laws so that us, the mere public, were furnished with ALL the facts?
3 or 6 mareels? 1 white elephant is 1 too many, ta very much.
John Tulloch
David,
You could get 4000years of lease on Mareel for the £40M owed to the SIC by government, have you signed the petition, yet?
Donnie Morrison
Stop the money for the pensioners’ lunch club.
Cut back on the financial help given to the most vulnerable members of our society – help which would have enabled them to stay at work at COPE.
But no problem to bail out the luvies at Mareel.
I had hoped the present council would be an improvement on previous ones – obviously not. Have they no shame?
Some years ago when the lovely dialect word mareel was adopted for this flagship building I jokingly suggested ‘sinkapenga’ would be more apt.
I have been proved right.
John Tulloch
David,
Would you do a rendition of “Deil stick da Capitalist” for You Tube?
David Spence
Yes John, I have signed the petition.
Even so, like many things related to politics, such an exercise, I fear, will be a futile one. The powers that be have no doubt made their decision years ago, and any attempt by the voters (signing the petition) to change their course will end up being ‘ Yes, we have listened to you………….but we’ll not tell you we are doing nothing about it……politics…..unless it benefits me/us. Not that I want to sound pessimistic in regards to our political representatives acting on our behalf lol
Robert Wishart
Forget all this rubbish about leases.The council has effectively bailed out Mareel to the sum of £1.1m.
Where is the money coming from? Can it be capital spending if it is a lease? Or Is it to come from revenue spending, or reserves?
It certainly makes the case for the – relatively – minor savings on some rural school closures look pretty weak.
ian tinkler
“It would have been “mad” to have walked away after investing over £6 million”. That about sums it all up, £1.1 million more to protect an n investment of £6 million. . . So a further £1.1 million is thrown down into this gaping money hole and idiocy. So now SIC have squandered an admitted £7.1 and the sum will rise, but of course the begging bowl is always there: it would have been “mad” to have walkaway after investing over £6.1 million, now its £7.1 invested! So it goes on and on, just how much more money must be lost before it is no longer mad to walk away? I must ask are the same people who oversaw this project still running Mareel! Incidentally what happens if DITT wins substantially, a million or so, with costs in a court action? How much was the cost of the two forensic reports into the building contract by accountants PricewaterhouseCoopers and legal firm Brodies? £15 million plus public funds gone to date, never mind, film tickets outperformed anybody’s expectations, but no profit expected this year! Just when are profits expected, if ever? Any of our Council clowns got the guts to go on the record and answer these questions?
Sandy McMillan
Not a lot you can say about the sitting Council, other than they are a bunch of two faced NUMPTIES.