Roomzzz Aparthotel is close to being signed up to occupy a prized development site in the shadow of Edinburgh Castle.

It is believed to have been chosen by Peverill Securities and Campus Development Management who will redevelop a series of derelict buildings in King’s Stables Road in the heart of the old town.

Roomzz bills itself as a combination of boutique hotel with the convenience of a serviced apartment. It has been involved in some sensitive developments in a number of big cities including the Corn Exchange in Manchester (below) and the Art Deco former Littlewoods building in Liverpool.

King’s Stables Road links the popular Grassmarket tourist destination with Lothian Road. In view of the controversy surrounding the planned redevelopment of the former Royal High School in Edinburgh the new development will be closely scrutinised as it also falls within the UNESCO world heritage boundary.

Daily Business has learned that Peverill – the development arm of the Bowmer and Kirkland Group – paid £18 million for the 1.3 acre site, a reflection of the level of interest. It is understood that the  two stage tender process attracted around 28 bids and at the second closing date eight parties were invited to bid again.

The chosen scheme involves a 130 bedroom hotel, 230 student beds and 12 residential units. There is also an arts café and artisan workshops.

The inclusion of student accommodation has proved controversial with one property developer telling Daily Business that it is a “wasted opportunity” to develop what is a rare plot of vacant land in key city centre location.

Some would have preferred a four or five star hotel on the site (below) which sits below the brutal sixties office block, Argyle House and enjoys unparalleled views of the castle.

The former council street lighting and cleansing depot was identified by the council as one of 12 “priority” development sites seen as crucial to the capital’s economic future.

The buildings have been unoccupied since being put on the market by the city council in 2009 and there was talk some years ago of building a business school there. The revival of the commercial property market has prompted renewed interest.

Edinburgh City Council made clear a preference for mixed use.

Bidders at stage two are said to have included Buccleuch Property, Cruden, Kennedy Wilson – which owns adjacent property – and VALAD. Knight Frank acted as adviser on the purchase of the site.

Campus Development Management is a company specialising in purpose-built student accommodation.

Edinburgh City Council said the preferred bidder had not confirmed the name of the hotel operator.