The proposed use of Shepherds Hill Cottage as a restaurant until midnight on weekends has a group of surrounding residents up in arms.
Newcastle council has lodged a development application to convert the heritage building atop King Edward Park into a cafe and restaurant, with proposed operating hours of 6am until midnight Thursday, Friday and Saturday and 6am until 10pm Sunday to Wednesday.
Expressions of interest are being sought to lease the space.
The proposed maximum capacity of the building would be 100 people. A grant application to reactivate the site suggested the space could be used for exhibitions and weddings.
The residents say they are concerned about late-night noise in the otherwise quiet area, as well as parking and commercialisation of the heritage space.
"It's very quiet up here mornings and evenings," resident Ross Whitelaw said. "People who ride past and stop for a chat, you can hear them from our homes."
Several residents said they would be happy to see the space used as a cafe or to host artists in residence, but believed the proposed restaurant and function use was "overdevelopment".
"People might say 'you've got lovely houses, you want to keep people out'. That's not the case," resident Virginia Hanlon said.
"This will turn it into a circus."
"It has always been a residential area," resident Simon Whitaker said. "It would be different if we bought a house next to the Delany."
Some residents also took issue with the council planning to add a commercial kitchen to the heritage building and said it was out of character with the site's military history. City of Newcastle received a $465,000 grant from the state government to install a new kitchen, storage and café facilities.
The cottage is subject to a conservation management plan, which a City of Newcastle spokesperson said would "guide the management of its heritage significance and informs future decisions, including leasing of the site for use by the community".
The spokesperson said the council worked with heritage consultants and Heritage NSW on the proposed adaptive re-use of the cottage as a food and drink premises and the proposal was approved by Heritage NSW prior to the development application being lodged.
"To complement the re-use, City of Newcastle is preparing heritage interpretation signage to highlight and promote the historical significance of this key coastal location," the council spokesperson said.
The timing of the development is another point of contention. Residents have raised objection with the notification period for the development application closing on September 9, five days before the council election.
They said this has not allowed them to effectively lobby their ward representatives, with two out of the three councillors not running for re-election, and their requests to extend the deadline were refused.
The City of Newcastle spokesperson said the development application was being publicly notified for an "extended period" of 28 days, from August 12 to September 9.
"The development application, and any submissions received, will be assessed holistically considering the proposed use, including associated works, hours of operation, and traffic management, under relevant planning controls and policies," the spokesperson said.
The council has spent more than $1 million overhauling the cottage after it was extensively damaged during severe storms in April 2015 and subsequently underwent asbestos removal which left the internal fabric in a poor condition.
The building was used as a Marine Rescue NSW headquarters up until the April 2015 storm.
