THE last derelict warehouse on York's now cosmopolitan riverside is to be given a £6 million facelift.

The old Merchant Exchange building on Queen's Staith, directly opposite the King's Arms, will be transformed into a restaurant and 23 luxury flats.

It will be the latest development in the rebirth of the city centre's riverside, which has seen empty warehouses and buildings turned into attractive bars, restaurants and the City Screen cinema in the past few years.

"York's riverside has undergone a transformation in recent years to reflect the city's status as a major player in the region," said John Reeves, managing director of Pocklington-based developers the Helmsley Group. "We'd like to see this prime riverside site restored for the benefit of the city and to make a real contribution to a thriving York economy."

It is estimated the restaurant will create about 40 permanent jobs, while up to 100 people will be involved in construction work. The scheme, which also involves Harrison Developments and Mike Howard, of the family which owns Castle Howard, has been accepted by City of York Council's planners.

The development has been designed by York architects Crease Strickland Parkin, and incorporates a 9,000 sq ft restaurant, featuring a balcony giving river views.

Several leading restaurant chains are reported to have expressed interest in the site.

Flats will be built on three levels above the restaurant.

The design would also incorporate the retention of the listed Varvils warehouse building.

A spokeswoman for the Helmsley Group said: "The plans take into account the vagaries of the River Ouse, providing secure undercroft parking for residents, with separate dry access to the restaurant and apartments being made possible even in times of the worst flood levels."

Ian McAndrew, associate director of Harrison Developments, said: "With the housing boom in York showing no sign of slowing, luxury riverside properties of this type are in huge demand.

"This, combined with an ever-increasing demand for high- quality restaurants in the city, has been taken into account in the development of the scheme."

Updated: 11:32 Saturday, February 09, 2002