Controversial plan for Edinburgh site revived by mystery developer

Plans to knock down historic buildings to make way for a five-star hotel and conference centre in the city's Old Town are set to be revived, despite the widespread condemnation they triggered.

Administrators handling the assets of wound-up developer Mountgrange are understood to have finally selected a preferred bidder for the huge site next to Waverley Station, 11 months after it went into administration.

Council leaders have revealed they expect the successful firm to pursue the same scheme that received planning permission almost 18 months ago. Planning chiefs do not expect changes to be made to a development which will also see more than 200 homes, office blocks, cafes, bars and restaurants and a new public square created just off the Canongate section of the Royal Mile.

The news emerged just weeks after The Scotsman revealed fears from property experts that the gap site was likely to remain for the foreseeable future.

One remaining hurdle is that a deal to snap up the site will have to be approved by the Lloyds Banking Group, which was owed more than 50 million when Mountgrange went into administration.

Although Mountgrange paid 20m for the site of the former bus depot five years ago, administrators Deloitte are likely to have been ordered to accept a cut-price offer, even though the Caltongate scheme had cleared all planning hurdles. However, insiders say several major UK firms had registered an interest by the official closing date earlier this month.

One source said: "Speculative developments like this are not particularly viable at the moment, but there are signs of recovery out there and it would still be an attractive investment in the longer term, particularly because planning permission is in place."

Jim Lowrie, the city's planning convener, said: "We're expecting to hear news very early in the new year on Caltongate but we understand the administrators have a preferred bidder in place and that they will be taking forward the scheme that has been approved.

"We have been consistently saying that is the council's preferred option. We have a good scheme that went through the full planning process and had the backing of Historic Scotland. We don't want to back through a whole new planning process again. We want to see that scheme happen now."

The council's head of planning John Bury added: "Our officials across the council believe the scheme which has consent is still viable although we would expect it to be carried out in phases."