04/06/2008 - 22:00

Hoyts wants Queensgate deal

04/06/2008 - 22:00

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Queensgate has been part of the fabric of Fremantle for nearly two decades, but its future as a cinema looks uncertain, with main tenant Hoyts seeking to renegotiate its lease and site owner, the City of Fremantle, investigating other uses for the buildin

Hoyts wants Queensgate deal

Queensgate has been part of the fabric of Fremantle for nearly two decades, but its future as a cinema looks uncertain, with main tenant Hoyts seeking to renegotiate its lease and site owner, the City of Fremantle, investigating other uses for the building.

After 18 years at the William Street location, Hoyts has moved to stem its losses on the lease, which it claims amount to $350,000 each year.

The group is seeking to negotiate a new rate for the two years remaining on its current lease, which expires in May 2010, as well as terminating its lease over the rarely used Port Cinema.

It has sought to extend the Queensgate lease by five years, but only if the city will grant a 30 per cent rent reduction on its $430,000-a-year lease.

The company is also losing money through its lease over Port Cinema.

Hoyts' original 20-year lease, which was signed in 1990 and covers the two cinemas, included the option of two additional five-year terms, bringing the maximum lease to a period of 30 years.

If it can secure a lower rent at Queensgate, Hoyts has pledged to give the ageing complex a $500,000 makeover within the first six months of signing the new lease.

However, the City of Fremantle council has voted to consider alternative uses for the site, including leasing it to another cinema operator.

While the city has acknowledged that a facelift for Queensgate could improve the bottom line for Hoyts, it believes the 30 per cent rate reduction is too big and would lower the property's value.

One option is to convert the building into the new regional WA police headquarters already planned for Fremantle.

It has already discussed the issue with Hoyts, and said that any new lease would have to include an opt-out clause, lasting up to seven years, to allow for this development to occur.

City of Fremantle Mayor Peter Tagliaferri said he believed the WA Police Force was keen to proceed with the centre, which would cost $84 million plus land acquisition costs, and would need support from the state government.

"It will be interesting to see whether they take their options to extend [the lease]. Obviously, if we have a new regional police centre there, a number of strategic objectives will be met. It would mean a very large police presence for the surrounding suburbs, and that would be a good thing," Mr Tagliaferri said.

Another option is to convert the site to commercial office space, and lease it out.

Currently, office rents in the port city range from $300 to $400 per square metre for new stock, with the Queensgate site expected to fetch about $350/sqm.

The city has also considered drafting a new lease for Hoyts based on turnover, which could increase revenue if the proposed upgrade went ahead, through increased attendance figures.

Meanwhile, Hoyts' other leased site in Fremantle, the Millenium Cinema Complex, is about to be put up for sale again, having been placed on then taken off the market last year by its owner, Melbourne-based property trust WRS Securities.

The company also owns the Rockingham cinema, leased by Hoyts, and is committed to selling both sites as a joint package.

The Millenium site is expected to fetch between $14 million and $16 million.

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