Darling Harbour icons hit the block as Jerry Schwartz fires up against flats in tourism hub

The owner of the Sofitel hotel in Darling Harbour, Sydney, has warned against overdevelopment. Picture: Lilly Vitorovich

The sale of the landmark Novotel and ibis Darling Harbour hotels could spark a dramatic overhaul of the Sydney precinct with 1000 apartments and two new hotels planned.

The radical overhaul of the ageing hotels is being led by asset manager Salter Brothers, which has already lodged plans via the NSW government’s unsolicited proposals process.

But, in a twist, the hotels have been put on the block by Middle Eastern sovereign fund Abu Dhabi Investment Authority for more than $500m via real estate agency CBRE.

An incoming buyer would gain control of the properties and a scheme has been prepared that would see it introduce two new hotel brands, a Pullman on the Novotel site and a new brand for locals, Mama Shelter, on the ibis site.

The four-tower scheme outlined in marketing materials would be founded on about 1000 units being built — adding substantially to the residential mix in the area.

The area is already heaving with construction as Mirvac is undertaking its $2.3bn Harbourside project that includes an apartment tower.

The ibis Hotel at Darling Harbour in Sydney. Picture: Joel Carrett

The listed developer last month locked in Japan’s heavyweight Mitsubishi Estate Co to back that project.

But, the surge of residential development has stirred the owner of the Sofitel Sydney Darling Harbour, hotel mogul Dr Jerry Schwartz, to call out the danger of excessive unit developments in a precinct founded to accommodate tourism.

“The original legislation designated Darling Harbour as a tourism, hospitality, conventions and events precinct, which did not permit residential developments. It should remain that way. I continue to fail to understand why these simple legislative requirements are avoided,” Dr Schwartz said.

Jerry Schwartz.

Notably, Lendlease’s building of Darling Harbour Live and ICC Sydney did not include a residential element near Sydney Harbour. The unit and student towers it built are in Haymarket.

Chinese-backed development and investment group Greaton also undertook the difficult development of The Ribbon as a W Hotel, which does not include residential apartments.

The existing hotels comprise two hotels with 781 rooms which have among the best occupancy rates in the area, providing an income while development plans are worked up.

The Australian reported in July the site’s owner had won through to the second stage of NSW’s controversial unsolicited proposals ­process.

Multiple property executives told The Australian at the time the landmark complex was likely to come to market but they had expected the approvals to be more advanced.

A previous sale process in 2021 aimed to secure about $500m but winning permission for a dramatic overhaul of the complex at a time when luxury apartment markets are firing could provide a windfall for ADIA, which bought the hotels as part of a $700m portfolio in 2013.

The investment manager Salter Brothers could also look to marshal capital in order to take control of the property, given its knowledge of the scheme.

It declined to comment and rival property players would also be keen on the site, as big developers including Billbergia and Cbus Properties had previously looked at the hotels.