A CONTROVERSIAL development in the heart of Edinburgh's historic Old Town is set to be revived after a London firm was selected as preferred bidder for the site.
Allied London has revealed it is dealing exclusively with Edinburgh city council and administrators handling the site of the doomed Caltongate scheme, which collapsed last year after its developer went bust.
Widespread changes are expected to be made to the previous development, costed at 300 million, which triggered a high-profile protest campaign and international condemnation by Unesco inspectors and an investigation by the European Commission.
A new "commercial and government quarter" is now being planned for the site, off the Royal Mile. A major new retail development is expected to be created under the plans by the firm, which was behind ventures such as Spinningfields in Manchester city centre, The Brunswick in London and St Christopher's Place in St Albans.
However, Allied London has raised hopes of a reprieve for two listed buildings that had been due to make way for a five-star hotel and conference centre under the previous scheme, by hinting that this element of the project is likely to be scaled back.
The company has pledged to work with heritage bodies in the capital to try to "integrate" the development into the surrounding landscape.
Allied London hopes to avoid having to start the planning process from scratch and is expected to make changes to the previously agreed scheme rather than submit a brand new one. Its development will be rejigged so it fits in more with the nearby Waverley Gate office complex in Waterloo Place, which has attracted a host of public sector tenants, the new-look Waverley Station and the overhaul of the St James shopping centre, work on which is expected to start next year.
A source close to the new plans said: "There is no need to start from scratch, but it's clear that the market is very different in Edinburgh than it was five years ago. We are looking closely at existing developments in the area and also what is going to be happening with the station. We don't see a five-star hotel as being integral to the new scheme."
Allied London said it expected negotiations to buy previous developer Mountgrange's assets from Deloitte, which is handling them on behalf of Lloyds Banking Group, to continue for several months.
A spokesman for the firm said: "We are well aware of the sensitivities surrounding the site. However, we have always worked very closely with the authorities, heritage organisations and neighbours in our previous schemes, and we are also planning to do that in Edinburgh."
More than 2,000 jobs had been promised under the Caltongate development, plans for which were first unveiled by Mountgrange in 2005.
Its scheme included the creation of the five-star hotel and conference centre, up to 200 new flats, 120,000sq ft of office space, cafs, bars and restaurants, and a new public square. The firm went into administration last March.
The impact of its planned project on the Old Town was widely thought to have triggered a Unesco inquiry into Edinburgh's World Heritage status.