Salter Brothers plans apartment-led transformation for Sydney’s Darling Harbour

The Middle Eastern sovereign fund that owns two hotels on Sydney’s waterfront could be the biggest winner if an apartment-heavy scheme is approved.

The Novotel Hotel in Darling Harbour, Sydney, could be replaced as part of a huge redevelopment by Salter Brothers. Picture: Phil Rogers

High-profile investment firm Salter Brothers has proposed a dramatic redevelopment of the landmark Novotel and Ibis hotels in Darling Harbour into a new precinct that would include 1000 apartments.

The move would see a multibillion-dollar transformation, including refreshing the hotels and putting up high-rise towers for the luxury units to capitalise on their Sydney Harbour location.

Salter Brothers has proposed the scheme via the NSW government’s controversial unsolicited proposals process on behalf of the hotel’s owner, Middle Eastern sovereign fund the Abu Dhabi Investment Authority.

The company is proposing a radical development that would see a new premium-grade hotel replacing the Novotel, the refurbishment of the Ibis Hotel, and about 1000 new apartments added to the site – almost four times as many that are housed in a Mirvac tower that is under construction in front of the hotels.

The plan is partly in response to Mirvac’s dramatic redevelopment of the Harbourside Shopping Centre. That $2bn scheme includes a revamped shopping centre, offices and a 43-storey luxury apartment tower, which has generated strong sales.

Salter Brothers was briefly a contender to refinance the troubled Star Entertainment empire, but terms could not be reached. Its $940m refinancing lifeline failed in April after the NSW government refused to back a key lender condition on the deal, with the troubled casino operator now working with US gambling company Bally’s.

An artist’s render of Mirvac Harbourside Residence at Darling Harbour.

Salter Brothers is separately planning a hotel float that would be one of the largest undertaken in Australia. The Melbourne-based fund manager plans to list a hospitality vehicle by 2026, with hopes to build its portfolio up to more than $3bn of hotels over the next five years.

Any move would dramatically change the character of Darling Harbour, which was originally conceived as a site for tourism, entertainment and conventions. But the scheme would bring new life to the hotel properties, which are viewed as ageing assets in the industry.

The move to put so many apartments on the site would hasten the encroachment of residential buildings around Darling Harbour despite the already tight constraints on the area. Two major hotel properties have been recently developed in the area but residential schemes are proving even more lucrative.

Chinese-backed Greaton developed The Ribbon, which includes the 585-room luxury W Sydney hotel, IMAX theatre and retail. Hotel mogul Jerry Schwartz also developed the luxury Sofitel Sydney Darling Harbour.

The scheme would protect the Middle Eastern sovereign fund’s position as the views of the existing property will be impacted by the Mirvac development. If the proposal wins government support it may again spark a bidding war for the hotels.

ADIA tried to sell off the hotels at Darling Harbour in 2021 for more than $500m. They have about 780 rooms and are the last of a once 31-asset portfolio the sovereign fund bought in 2013.

The Ibis hotel is held on strata title, the Novotel is freehold, and developers have long eyed this opportunity. Apartment developer Billbergia came close to buying the hotels in 2021 and had plans for its own overhaul of the properties. The NSW government has determined the Salter Brothers proposal is of sufficient interest to warrant further development and progression to the second stage of its unsolicited proposals process. The plan would also see a redevelopment of the Harbourside car park, which could become important if apartments are approved.

Salter Brothers is seeking to enter into new 99-year lease agreements with the landowner, Place Management NSW, to underpin the scheme so apartments can be sold.

The NSW government body assessing the plan noted it “has the potential to deliver public benefits by increasing Sydney’s housing supply (including affordable housing)” and would also boost NSW’s visitor and night-time economy. The assessment panel said that Salter Brothers was uniquely positioned to deliver the proposed development and deliver benefits in line with the state’s priorities.

The same route was used for failed plans to transform Rosehill Gardens racecourse in Sydney into a huge housing development. The plan, which would have seen the course sold to the NSW government for $5bn, was rejected by the members of the Australian Turf Club.

Salter Brothers declined to comment.

Originally published as Salter Brothers plans apartment-led transformation for Sydney’s Darling Harbour