Developers Michael and John Chow are planning to build a 10-storey super-brothel on the prime inner-city site once occupied by the historic Palace Hotel.

The "entertainment and hospitality centre" will have underground parking, a restaurant and bars and a rooftop swimming pool, as well as a "gentlemen's club".

Following a deal with the publishers of Penthouse Magazine, two floors of the building will be occupied by a Penthouse Club - where adult performances by models will "bring the magazine to life".

The Chow Group have secured the Australasian rights to operate Penthouse Clubs, and the new Auckland club would be the first in the Asia-Pacific region.

However, Auckland Council spokesman Glyn Walters said no consent applications had been received for the new building's construction.

A $200,000 bill the council sent to the Chows for the demolition of the Palace Hotel, located opposite SkyCity Casino, remains unpaid.

Yesterday, Chow Group lawyer Max Tait refused to comment on the non-payment. As a rule the council does not issue consents to applicants who owe them money.

The council is still considering legal action against the Chows after an engineering report revealed the renovations they carried out on the 124-year-old hotel severely damaged it.

The building became a safety risk after it began cracking and moving last November, and was torn down on the orders of Mayor Len Brown.

The Chows had been converting the 1886 building into a brothel, and initially threatened legal action against the council for demolishing the building. However, engineers found the hotel's weakness was caused by its basement walls not being adequately supported during the renovations.

Mr Walters said the new building's application could require public or limited notification.

"This will require a submission period, hearings and a decision. And any conditions required will be made by a hearings panel."

Neither of the Chow brothers returned the Herald's calls yesterday, but in a statement John Chow said the new venue would cater to "everyone who grew up with the world-famous Penthouse brand".

"The Palace Hotel was an important site. It was sad to see it torn down, but the new development will be better than ever."

If the development does gain council approval it is expected to be completed by early 2013.