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.
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.”