Businessman Tom Steinhoff could take legal action to get back the “considerable sum” he invested in the redevelopment of Shelly Bay Beach House, he revealed yesterday.

And if court action was successful, island taxpayers will have to foot the compensation bill.

Public Works staff started demolition work on the structurally unsound building on Tuesday on the grounds of “public safety”.

The Bermuda Government said it would draw up fresh plans for the site after the area was levelled. But Mr Steinhoff said: “We could have done something with it; our engineers had looked at it. My understanding is that what we had left there was structurally OK to build on.”

Mr Steinhoff planned to spend about $1 million building a restaurant and bar with water sports facilities on the site and also create 19 jobs, including management, chefs and waiters.

He said the extra work needed to restore the building would have added about $600,000 to the total bill, which he would have paid if given a better deal on the original lease.

He added: “I am very upset. It was certainly something that I considered would do good for the community.

“I was going to put an awful lot of money into a government building that hasn’t been a successful business — it wasn’t risk-free or a golden egg.

“It was a high-risk venture putting good money into a community building and something that we hoped was going to do great things for Shelly Bay.”

He said that there was no mention of the building being structurally unsound when the tender was put out by the former One Bermuda Alliance administration, which rented the premises to him.

But, as work progressed, it was found that the building was unsafe and would either need to be stripped back and rebuilt or razed.

Mr Steinhoff said he believed he had got the structure back to a stage where it could be built on, before the new Progressive Labour Party government decided to knock it down in favour of a new “purpose-built facility”.

He added that, when structural problems were found, construction halted so that he could renegotiate the terms of his lease due to the extra work and investment needed.

But he said the ministry would not negotiate. He added he had already invested “a considerable sum” into the removal of the structurally unsafe sections of the property, as well as some building work.

Mr Steinhoff said he had still not ruled out forking out the additional costs to rebuild the property from scratch, despite the ministry’s plans for a new project. Mr Steinhoff said: “When we bid on the tender, we were expecting electrical and plumbing, but not structural work — that wasn’t a point of conversation.

“The building as it was tendered wasn’t for a structural rebuild. We were going to do a little bit but we weren’t planning on all the structural steel in the building being totally corroded.

“We went in expecting the walls and roof to be sufficient.”

“We took out most of the structurally unsound parts. I was renting, so I was looking for a longer lease and better rent.”

But he added: “They wouldn’t change anything in the lease.”

And Mr Steinhoff said he had still not ruled out paying the additional costs to rebuild the property from scratch, despite the ministry’s plans for a new project.

A government spokeswoman said: “The Ministry of Public Works notes that the planned demolition of the Shelly Bay Beach house was a project in train.

“As previously stated, the building was deemed structurally unsound and, in the overwhelming interest of public safety, the decision was taken to raze the building.

“As stated in the previous release, the ministry advised that conceptual plans for a purpose-built facility are being designed for presentation and consultation with area parliamentary representatives and members of the public.”

On Tuesday, Hamilton West MP Wayne Furbert praised public works minister Lieutenant-Colonel David Burch for getting the job done so quickly.

The Ministry of Public Works refused to comment on the possible cost to taxpayers if it had to compensate Mr Steinhoff for the cash already ploughed into the project.

A spokeswoman said the Ministry “does not comment on such matters”.