The St. Regis Hotel is laying off its staff as a prelude to the demolition and redevelopment of the 107-year-old building.

The dry hotel's operator has notified more than 40 workers the business is expected to wind down in June. The building's owner, Richmond Hill, Ont. developer Fortress Real Developments, intends to take possession of the building the following month and incorporate it into the SkyCity Centre tower project at Smith Street and Graham Avenue.

"We anticipate vacant possession of the St. Regis Hotel in early July, allowing us to proceed with demolition following city approvals," Fortress spokesperson Natasha Alibhai said in a statement last week.

Fortress bought the St. Regis as well as a parking lot next door for $4 million in 2015 from CentreVenture, the city's downtown development agency. CentreVenture purchased the hotel three years earlier and allowed its liquor license to expire as part of an effort to combat public intoxication downtown.

Fortress initially planned to build a 625-stall parking structure and commercial/retail complex on the hotel site. The deal was supposed to be cancelled if construction did not begin by April 30 of this year.

CentreVenture gave Fortress a one-year extension on the deal this March, when the developer announced plans to incorporate the St. Regis redevelopment into SkyCity Centre project, which is now a partnership with Edenshaw Developments of Mississauga, Ont.

"For the past two years (2014-16), the St. Regis site was a finalist in response to a [request for proposals] we entered for a national tenant," Alibhai said. 

"When it recently became known that our site would not be selected, and our co-developer Edenshaw was confirmed, we jointly agreed to revise our development plan to include at grade retail and commercial parking, incorporating it into our SkyCity project."

SkyCity Centre conceptual drawing

SkyCity Centre, proposed for Graham Avenue and Smith Street, would be Winnipeg's tallest tower. (Fortress Real Developments)

Alibhai said Fortress is negotiating leases "with several commercial and retail tenants" to allow the firm to attain construction financing for the SkyCity project, which has an approximate pricetag of $200 million. The main component of the project is a 44-storey, 380-unit residential and office tower that would be Winnipeg's tallest building.

In April, city council approved a $6.5-million economic incentive grant for the project that replaces a downtown-housing stimulus package that was pulled off the table after SkyCity could no longer meet the program`s construction deadline.That package also included $8 million worth of provincial property-tax rebates which have not been replaced by a new grant.

To date, Fortress has not commenced construction on the SkyCity site. An excavation permit issued by the city last year expired on Dec. 1. 

Fortress must present the city with a redevelopment plan for the St. Regis Hotel before a demolition permit will be issued. Council property chair John Orlikow said in 2015 the city will not allow a new surface-parking lot to replace the structure.

CentreVenture president and CEO Angela Mathieson said this position is warranted.

"That certainly is the city's practice and it's a practice that we support," Mathieson said last week. "We would not support demolition of the building without a redevelopment plan in place and ready to be executed."

The St. Regis opened in 1910 as a two-storey building originally known as The Rookery Block. It was then expanded to four storeys and converted into a hotel.