Budget blues

THE budget for the redevelopment of Perth’s historic old Treasury Building into a boutique hotel has blown-out to $30 million, necessitating the developers, Mirvac/Fini and Hawaiian Investments, to ask for an extension of time from the State Government in order to revise their proposal for the project.

The discovery of rust in parts of the building’s steel-structured balconies caused by decaying 1890s mortar is the main culprit, according to industry sources. The cost of cleaning the steel and replacing the mortar will add a further $10 million to the original redevelopment and renovation budget.

It is another blow for the developers, whose original preferred hotel operator, Accor’s All Seasons Premier Hotels, withdrew when the Heritage Commission was indecisive over expanding the number of proposed hotel rooms from 130 to 200. The extra rooms would have added an annual $5 million gross to the hotel’s revenue.

Negotiations are continuing favourably with the Westin Hotels and Resorts Worldwide’s luxury Starwood hotel chain for a now-approved 200 room five-star hotel on the site. Under subsidiaries Sheraton, Four Points, W and Westin, the chain has more than 700 hotels in 80 countries around the world and manages Sydney’s renovated Finger Wharf Starwood hotel.

Should these negotiations fail, Mirvac Hotels owns the Marriott and Sebel hotel chains. Mirvac Hotels already has a presence in Perth in the recently renovated Sebel Hotel and is negotiating with the developers of the Bunkers Bay resort, south of Dunsborough, for a Marriott Hotel in that resort, but is yet to launch a Marriott in Perth.

Mirvac/Fini chief executive officer Adrian Fini declined to comment on the Treasury Building until after the company hears from the State Government regarding the extension application. Industry sources say that any contribution from the Government toward the cost of the Treasury’s structural restoration is unlikely given the level of local and State Government commitment to Multiplex for the Convention Centre.

The new Labor Government has yet to form a policy toward restoration of the Treasury Building but is believed to be favourable to Mirvac/Fini and Hawaiian’s proposed extension.

To be viable, the Treasury hotel project needs room rates of about $250 a night. Five-star room rates in Perth currently range upward of $180 a night, but industry sources believe by the anticipated completion date of 2006 the minimum rate will be achievable.

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