Authorities were investigating whether the Palace Theatre should be granted heritage protection when workers began controversially stripping the venue of its century-old interior decorations this week.

On Friday the site's developer owners issued a statement defending what they had done, claiming the interior of the building "held little heritage value".

In the media release titled "Jinshan Investments operating within its rights", the developer said all work carried out at the venue was lawful.

"The developer is undertaking works to improve site safety, which had become compromised in the period following the departure of the former the former music venue tenant," the statement said.

Fairfax Media understands some items found in skip outside the theatre on Thursday afternoon were part of features that Melbourne City Council staff were proposing to list for heritage recognition.