The former NHS Shetland headquarters in Lerwick will be redeveloped as a Holiday Inn Express hotel opening early 2016.
Aberdeen property tycoon Robert Keane and Shetland-born accounts manager Martin Watt have teamed up to build a 125 bed hotel on the site of Brevik House on South Road, as well as serviced offices and apartments.
The pair set up Breiwick Bay Properties Ltd (BBPL) to buy the building and are investing £2million into the project.
Last month they invited local investors to contribute £1million towards the venture, with the prospect of healthy profits over the next five years.
Mr Keane is chief executive of the Ardent Group which has an extensive portfolio of properties throughout the UK, notably the Aberdeen Douglas Hotel and is building the new EnQuest offices near the city’s Union Square.
In an address to potential investors, he said: “There is little doubt that economic activity in Shetland will immediately cement the success of our proposed development, but at the same time our proven track record in developing leisure income streams from hotels in Aberdeen and Peterhead will ensure that the investment has in-built sustainability.”
The pair cite the major ongoing work at Sullom Voe with BP’s planned gas sweetening plant and Chevron’s proposed £6 billion development of the Rosebank oil field west of Shetland.
Mr Keane also highlights major construction projects including the new Anderson High School, a new Lerwick power station and the proposed Viking Energy wind farm.
The company highlights that Shetland’s low unemployment means there will continue to be a large number of visiting workers.
Currently Lerwick hotels enjoy an 80% occupancy rate with an average charge of £100 a night. This venture claims to break even at 40% occupancy at £90 per night.
BBPL have appointed Shetland project managers H James Nisbet and Redman Sutherland Architects to help the project through the planning process.
If successful, they hope work will start early next year for a three star hotel targeting budget business and leisure travellers with 85 car parking spaces.
The hotel would open early 2016, with up to 10,000 square feet of high grade offices as well as apartments completed later that year.
If they fail to get planning permission they are looking at building up to 40 town houses on the attractive waterfront site.