The 1936 signal box sits on the new Market Street Lawn between Queen’s Wharf and the new light rail stop on Scott Street.

Mr Macdonald, who owns The Little Nel restaurant and Hotel Nelson at Nelson Bay, won the tender for a long-term lease on the building when Hunter Development Corporation called for expressions of interest last year.

He lodged plans for the project last week with Newcastle City Council and will also apply to the state Office of Environment and Heritage to carry out works on the building.

Mr Macdonald said he had long hoped to open a restaurant in Newcastle.

“I saw the signal box and thought it was such an opportunity,” he said.

“It’s a unique site. It’s designed to be an iconic venue with a rooftop terrace and an elevated garden. It’s going to be a central part of the Market Street Lawn.”

He said the restaurant would open from breakfast to dinner and could offer takeaway kits and blankets for customers to take to the nearby lawn.

It will have seating for 150 diners, including 64 indoors and 86 outside on the ground and first floors.

The building contains switching equipment – electro-pneumatic miniature-lever-power interlocking machine gears and relay cases, to be precise – of interest to railway buffs, and these will be on display in part of the restaurant. The gear once controlled the rail lines east of Merewether Street.

“It will be more than just another cafe,” Mr Macdonald said. “It is part attraction with the signal gear restored and on display.”

The Derive Architecture design for the development includes a new single-storey pavilion in steel and glass with a rooftop viewing platform and external spiral staircase. 

HDC has been carrying out restoration work on the signal box, and plans for the nearby landscaped area include a water feature which will light up at night.