1.19 The agreement permitted the Armouries and RAI to deliver their financial contributions to the project. RAI raised £14.1 million of private funding for the project, while the Armouries contributed £20 million to the estimated development costs of approximately £43 million. There were further contributions from Leeds City Council and Leeds Development Corporation with a total value of £8.5 million. The public and private sector sources of funds, and the uses to which those funds were put, are shown in Figure 7 overleaf.
6 |
| Responsibilities of the parties: 1993 to 1999 |
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| Responsibilities for the new museum were split between the public sector and the private sector but rested mostly with the private sector party, RAI. |
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| Public Sector Responsibilities | Private Sector Responsibilities | Joint Responsibilities |
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| Construction phase |
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| ■ Contribute grant of £20 million towards construction costs ■ Obtain contributions from Leeds Development Corporation (£5 million) and Leeds City Council (£3.5 million) ■ Design the display of the collection ■ Pack and unpack the collection ■ Lease the site for the new museum for 999 years from the existing owner, the British Waterways Board, and sub-let to the private sector for 60 years (1) | ■ Let a fixed price contract for the construction of the museum and manage this ■ Contribute over £14 million to the cost of construction and fit-out ■ Procure the displays for the collection according to the Armouries' designs ■ Procure the removal of the collection to Leeds |
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| Operational phase |
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| ■ Pay the agreed lease rental to the British Waterways Board from the opening of the museum ■ Provide the major part of the collection for exhibition in the new museum ■ Acquire new items for the collection ■ Provide Royal Armouries' staff to care for and maintain the collection, and deliver interpretative, education and research services ■ Meet the on-going costs of existing Royal Armouries' staff who transfer to Leeds to care for the collection | ■ Under the sub-lease, reimburse the Royal Armouries for the annual rent payable to the British Waterways Board ■ Let an operating contract to a main operator to manage the commercial aspects of the new museum in accordance with the operating specification ■ Provide the Armouries with facilities at the new museum to allow it to fulfil its statutory duties, including secure storage, space for library, education centre, and office facilities, at no cost to the Armouries ■ Fund the museum's operating costs from the receipts from visitor income and other income sources, including car parking charges, retail, catering, corporate hospitality and sponsorship income, and manage the commercial aspects of the museum for a period of 60 years ■ Make an annual payment to the Royal Armouries to reimburse the Armouries for the costs of the extra staff the Armouries needed to take on as a result of the establishment of the new museum ■ Make provision for the security of the collection to a standard agreed in the operating specification ■ Maintain the building and fixtures and fittings for the period of the agreement in accordance with the operating specification | ■ Draw up an agreed operating specification before the museum opened ■ Jointly undertake and finance the promotion and marketing of the new museum in accordance with the operating specification |
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| Development of Clarence Dock |
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| ■ Approve the development scheme for the rest of the leased site ■ Share in the net profit from the development |
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| Note: 1. Once the development agreement becomes active, the Armouries’ 999 year lease on part of the site lapses, although the Armouries has the right to resume the lease on this land after the development period. Source: 1993’s contract documents | ||
7 |
| Source and use of project funding | ||
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| The cost of constructing the new museum was met from a number of different sources of funding, both private and public sector. | ||
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| £ million | £ million |
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| Uses of funds |
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| Construction and fitting-out costs | 34.4 |
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| Marketing, relocation, professional fees and pre-opening expenditure | 5.5 |
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| Interest and contingency | 2.7 |
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| 42.6 |
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| Sources of funds |
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| Royal Armouries | 20.0 |
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| Leeds Development Corporation | 5.0 |
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| Leeds City Council | 3.5 |
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| Private finance: equity and subordinated debt | 8.0 |
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| : debt | 6.1 |
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| 42.6 |
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| Source: The Royal Armouries |
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……………………………………………………………………………………………………………………………………………………… | ||||
1.20 The agreement allowed the Armouries a limited share in any future profits that RAI made from the museum operations. These profits were to be retained by RAI in the first instance as it had accepted a high level of risk under the deal. However, if the number of visitors increased above 1.3 million, there was provision for the Armouries to share in the extra income achieved. The agreement did not expose the Armouries in the first instance to downside risk if profits were less than expected at Leeds, or if the museum made operating losses. The Armouries also still expected to benefit financially from the improvements to the tourist facilities in the Tower that would take place once the Armouries had relocated some of its operations to Leeds.
1.21 The deal also provided the Armouries and RAI with a share of any future development gain from the surrounding Clarence Dock site. Under an agreement with the British Waterways Board, the owners of the site's freehold, both the Armouries and RAI were to share in any profit which arose from the development of that part of the Dock site which the Armouries leased, while RAI were due to receive further development gain arising from that part of the Dock site not leased by the Armouries.