Sheraton Hotels and Resorts, the largest Starwood Hotels and Resorts Worldwide brand, will build a hotel in Colombo on land originally offered to a Chinese firm, the Deputy Economic Development Minister said on Sunday.

Lakshman Yapa Abeywardena said the government has completed negotiations with Sheraton to allocate the land, earlier offered to China National Aero Technology Import and Export Corporation (CATIC).

“The negotiations with Sheraton are successfully over and we have agreed to give (the) CATIC land,” he told Reuters.

However, he declined to comment on the amount of the investment or extent of land the government had agreed to offer Sheraton under a 99-year lease.

Last month, Sri Lanka annulled a $500 million investment deal with CATIC after it refused to sell the beach front land outright to the state-run Chinese conglomerate as agreed earlier.

The CATIC deal was among the largest foreign investments since the end of the war in 2009, and analysts say its cancellation has created concerns among potential investors.

Officially, Rajapaksa questioned why the land for the hotel on the Galle Face seafront grounds was being sold instead of given on a long-term lease. CATIC balked at the change in terms, having already paid $54.5 million.

The government says it is negotiating to give CATIC another property, and is in talks to lease the land in front of Galle Face Green it offered earlier to another party, which it declined to name, to build a hotel.

However, the government has not changed the terms of a similar $500 million hotel, shopping and apartment project with Shangri-La Asia Ltd , which paid $125 million to buy 10 acres next to the 6 acres CATIC wanted. - Reuters