The NSW government is selling major hotel assets to pay for a $200 million upgrade of Circular Quay

An artist’s impression of the Circular Quay upgrade.

The NSW government is selling some of the city’s best hotels for a $200 million upgrade of Circular Quay wharves.

As part of the government’s “asset recyling” program, the Shangri-La and Four Seasons hotels in the CBD, the Novotel and Mercure hotels at Darling Harbour and commercial offices at Darling Quarter will be offloaded in the wake of a review of government-owned lands around Sydney Harbour.

NSW finance minister Dominic Perrottet said the sites earmarked for sale were deemed to be not of long-term strategic importance.

“There is absolutely no reason in the 21st century why the NSW Government needs to be the landlord for these luxury hotels,” he said.

“The review has identified a number of non-core government buildings in The Rocks area that may also be suitable for divestment, but this would be subject to a review and potential strengthening of heritage conservation controls.”

The Baird government is also killing off the Sydney Harbour Foreshore Authority (SHFA), which owns the sites, moving its functions such as property management to Government Property NSW and events to Destination NSW. SHFA staff will move to the Department of Finance, Services and Innovation. The premier could not say if there would be any job losses as a result of disbanding the SFHA.

Other responsibilities for managing the harbour foreshore will be handed over to the Greater Sydney Commission.

Perrottet said the review “revealed duplication and inefficiency” in the SHFA, owns some of the state’s most significant assets and is responsible for over 200 leases, 150 licenses and 115 tenancies. The minister said the organisation had around $1 billion in assets under its control and the government will continue to look at what property is should dispose of.

He would not put a figure on how much the government expects to make from the sale of the hotels, nor reveal how much revenue Treasury received under the existing leasing arrangement, arguing instead that putting the funds towards the Circular Quay upgrade was a better use of the money.

Mike Baird said his government was now consulting with the Commonwealth to examine “the most appropriate land use planning, heritage, and management framework” for The Rocks area.

The move follows the sale of 293 public housing properties, including 121 terrace houses around The Rocks and Millers Point, moving 400 public housing tenants out of the historic area.

The government will set aside $200 million from the sale of the hotel properties for the Circular Quay upgrade, following on from last year’s $3 million upgrade of the ferry and train hub, which is used by around 170,000 commuters a week.

He ruled out moving the Cahill Expressway, the road and rail corridor which bisects the CBD and Circular Quay and has long been criticised as an eyesore, saying such a move would cost “billions of dollars”.

Designs for Circular Quay wharf upgrades are not yet finalised, but one option being considered is double-storey wharves with new retail facilities.

Dominic Perrottet said the $200 million figure was derived from preliminary ideas about the upgrade, which could potentially be a public-private equity venture.

Construction is expected to begin in 2019.

An artist’s impression of the Circular Quay upgrade.

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