Napier City Council planning staff have recommended approval be granted for the latest stages of the project, subject to a number of conditions.
Todd Property's resource consent application is being considered at the hearing by independent commissioner Mike Garland.
Chris Simmons, a lawyer for Todd Property, told Mr Garland yesterday the planned development would have "a number of positive effects on the environment".
Mr Simmons said the demolition of the derelict former hospital buildings, and replacement with an architecturally-designed, landscaped, co-ordinated residential development represented a significant positive effect.
"The former use of the site and, in particular, the scale and institutional character of the former hospital buildings, was incongruous with the surrounding residential environment.
"The proposed new use will improve amenity and revitalise the area."
The provision of additional accommodation within Napier, planned road improvements associated with the site, the economic activity resulting from the construction and the jobs created for cafe workers were among benefits of the project.
Mr Simmons said the development proposal "represents an efficient and appropriate use of an underdeveloped physical resource, being a large derelict site in proximity to Napier's CBD".
The consent application drew a mix of positive and negative views from submitters ahead of the hearing.
The development site has sweeping harbour views and suggestions from submitters included a call to include a public viewing platform on top of one of the apartment towers.
But Mr Simmons told the hearing that suggestion was "not really practically feasible".
"While aspirational, such a proposal is fanciful," he said.