Starwood has already established its 4.5-star Aloft brand in China and the US and will launch in Australia through the deal.

Sydney’s limited hotel room stock is about to be boosted by a Melbourne developer spending $50 million converting a 1909 heritage-protected office block into a 16-level luxury hotel with US hospitality operator Starwood in tow.

Dean Rzechta at Druids House in Sydney, site of his luxury hotel development. Picture: Kelly BarnesSource: News Corp Australia

Starwood has already established its 4.5-star Aloft brand in China and the US and will launch in Australia through the deal, which will see a 136-room hotel fronting 302 Pitt Street developed near the Greenland Group’s 67-level Bathurst Street tower. The Aloft Sydney Pitt Street will open in November next year, followed by the Aloft Perth Rivervale.

Residential group Ninety Four Feet, headed by former professional basketballer Dean Rzechta, says the conversion of 302 Pitt Street — otherwise known as Druids House — will be the start of a hotel rollout for the family-run business.

The company plans to develop at least three more hotels in Sydney and Melbourne on top of the more than 1000 apartments it has under construction, predominantly in Victoria.

“We had been looking in Sydney for long time, but it’s difficult to get set in this environment,” Mr Rzechta said.

“(But) Greenland sparked interest in this location; they defined that corner. We have secured more hotel (sites) in the Melbourne and Sydney CBDs. We have three committed hotels already, but no brands and no planning approval as yet. We are hoping to roll out another Starwood asset within the next 6-12 months in Sydney and Melbourne.

“There are definitely more hotels to come.”

Apart from buying hotel sites in the Sydney CBD, Ninety Four Feet has also bought in Bondi and Randwick with plans for medium-density residential developments.

It bought Druids House at 302 Pitt Street for about $10m in late 2013 in an off-market deal. It was originally planning a residential project, but was drawn by a plan to develop a hotel with a secure cash flow.

“We don’t see much value in commercial or retail any more ... the hotel was an obvious no brainer,’’ Mr Rzechta said.

“The hotel business is a very much cashflow-driven business and as a developer you part ways with a project when it’s finished, but for us we were always looking for the creation of an ongoing income stream.”

As a sweetener Starwood’s director of acquisitions and development, Andrew Taylor, said the company would underwrite the hotel’s occupancies for three years.

“We are supporting the income during the ramp-up period. Given the (nearby) Sheraton on the Park is running at 97 per cent year to date, I think we will see this hotel running at 85 per cent occupancy,” Mr Taylor said.