Melbourne could be set to lose another iconic music venue, with plans for the Palace Theatre in the city centre to be demolished to make way for a luxury 5-star hotel and apartment complex set to cost around $180 million.

The venue was put up for public auction in mid-June last year, where amidst concerns that it would most likely to be razed for a ‘high-density residential project.’ it was snapped up by Chinese property investment firm Jinshan Investments.

Although remaining coy at the time of the sale, owner Xuan Xu has now revealed plans to build Australia’s first ‘W Hotel’. Built over 40,000 square metres, “W Melbourne” would host a 205-room hotel and 145 apartments according to The Border Mail.

The three-storey building has been operating as a live music venue since 1987, but was formerly a theatre and cinema over a hundred years ago, and has played host to the likes of The Darkness, The Dandy Warhols, Queens Of The Stone Age, and Kaiser Chiefs.

Plans for the hotel/apartment complex have been submitted to the state Government, with the developer hoping to be permitted to demolish the entire complex, leaving nothing of the century old facade or interior. The 2000-capacity venue is partially covered as a Melbourne Heritage-listed site, but with only its facade being protected as a heritage precinct leaving its interior technically unprotected.

See an artist’s impression of the proposed development below.

The proposal is set to meet stiff opposition from music groups, and from heritage activists such as the Melbourne Heritage Action group, who want to see the interior of the building preserved.

A spokesman for the Melbourne Heritage Action group, Rohan Storey, argued that it was the interior of the venue that was more significant from a heritage perspective rather than it’s façade. “But the city of Melbourne can’t or hasn’t protected any interiors yet,” Mr Storey added.

The National Trust are also concerned about the proposed development, with a spokesperson stressing that it could set the city on a dangerous course. “I think in 20 years this precinct could be transformed unless the minister draws a line in the sand,” the spokesperson said, highlighting concerns that the recently approved redevelopment of the neighbouring Windsor Hotel may have set a precedent.

If the proposal get the go-ahead, it could also spell disaster for the local music industry. The loss of The Palace would leave a large gap in Melbourne’s live music scene, removing an important stepping stone for acts as their careers grow in the process.

The operators of the music venue which leases the site are yet to make an official comment, but said at the time of the sale last year that the redevelopment of the site was a “worst case scenario”. Now it seems that their worst nightmare is becoming a reality, although they’ve previously indicated that their response to this scenario would be to seek a lease extension to allow them to continue to operate while planning approval was sought.

But the developers don’t seem too concerned with the musical heritage of importance of a venue like The Palace. The development manager for the project was today stressing that the hotel would become a tourist destination in itself, generate 620 jobs once built, and would attract big spenders who will fork over at least $1000 a night to stay.

“It will really help to revitalise the ground level of the site, with an introduction of a new laneway from Bourke Street through to Little Bourke Street,” Development manager Tim Price said.

“The hotel and apartment development is expected to contribute up to $394 million to the Melbourne economy in its first 15 years of operation,” he added.

The future of the venue now rest on the approval process with the state government, but if all goes to plan the demolition of the venue and construction on the project could start as early as next year and be completed in late 2016.