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The City of Sydney has slashed the rent for a national cinema chain to ensure the much-loved Chauvel Cinema in the eastern suburbs stays open.
Palace Cinemas last month warned it would be forced to close the Chauvel Cinema housed in the Paddington Town Hall due to the poor state of the building and low ticket sales.
It was a sad prospect for film-goers, who farewelled the Palace Verona from Oxford Street in February.
On Monday night, the City of Sydney voted to approve a substantial rent reduction for the remainder of Palace's lease, which expires in March 2026.
Palace CEO Benjamin Zeccola said the two-screen cinema had been running at a loss, in part because the state of the building was "dilapidated", which was putting people off coming to the cinema.
"The attendances have fallen to the point where it's really difficult to carry on," he said.
"We would either need to exit [the lease] early or council approve a reduced rate."
The council says it can't renew Palace Cinema's lease without a new tender process. (Supplied: Palace Cinemas)
Mr Zeccola said they had been trying to resolve long-running maintenance issues for nearly 10 years.
"It's owned by the council and the building's been affected by inundation … that's caused all sorts of issues."
A City of Sydney spokesperson said Palace was responsible for the upkeep of the cinema interiors, including seats and carpets.
Long-term uncertainty
Mr Zeccola said the rent reduction would save the cinema in the short term, but its long-term future was still in doubt.
The council committed $25 million in June to upgrade the 120-year-old Paddington Town Hall, but it's unclear if Palace will remain as a tenant.
Mr Zeccola said the company had proposed extending its lease beyond 2026, but had been told it must be put out to tender.
A council spokesperson said Palace took over the Chauvel in 2006 and would soon reach the 21-year limit for leases on "community land" under NSW legislation.
"Where a business wishes to stay in the space after 21 years, they need to re-tender under a regulated application process," a council spokesperson said.
Neither the council or Palace would disclose the amount of the rent reduction but the ABC understands it is "significant".
Lord Mayor Clover Moore supported the decision to provide "essential support" to ensure the Chauvel continued until the end of its lease.
"The Chauvel Cinema is a much-loved institution and part of Oxford Street's cultural fabric," she said.
"The city has also committed $25 million to restore this wonderful example of Victorian classical architecture and cornerstone of Oxford street, so it can cater for a wide range of community uses and events for another 100 years."
Councillors question support for national chain
New Greens councillor Matthew Thompson was one of two councillors who voted against the rent reduction.
"It's pretty rich for a national cinema chain to be demanding a significant rent reduction from council," Cr Thompson said.
He said the council should support the arts but prioritise not-for-profits and community organisations.
"If the cinema were to close there are so many other opportunities for the space," he said.
"Palace are a for-profit company. If they can't afford the rent they should make way for community groups that could activate and reinvigorate the venue."
Independent councillor Yvonne Wheldon also voted against the rent reduction.
She said she was conscious neighbouring restaurants and bars would lose out if the site was left vacant, but there was "not enough information to justify a rent reduction for a large and profitable company".
"We need to expedite maintenance works and find a new operator or a good community use for the theatre."