Crews have begun rebuilding a planned hotel on Great Diamond Island that was destroyed by fire last fall, according to the developer.

David Bateman, president of Bateman Partners, said at a news conference Friday that crews this week began stabilizing the remaining walls of Fort McKinley. He expects the $12.3 million Inn at Diamond Cove will be ready to open in May 2015.

The structure was originally built as Army barracks at the turn of the 20th century to protect Portland Harbor during the Spanish-American War. Its transformation into a 44-unit seasonal hotel was two weeks away from completion when it was destroyed by fire early on Nov. 23.

“This is a city whose very emblem is the phoenix. This is a city that itself has risen four times from the ashes and whose underlying motto is ‘I will rise again,’ ” Bateman said. “And I think that sums up our vision and commitment to this project.”

Bateman said the fire caused $10 million in damage and that the insurance company has made a “substantial” payment for the loss.

He said the project can go forward thanks to Portland firefighters, who were able to contain the fire and preserve most of the historic walls. Since more than 75 percent of the original walls are still standing, the developers will be able to re-apply for historic tax credits. “That was integral to the initial project and is the underlying reason we are able to move forward again,” he said.

City officials at the news conference hailed the restart of the project as an important economic development and historic preservation project.

Mayor Michael Brennan noted that Business Insider, an online publication, recently ranked Portland as one of 14 places in the world to visit. The hotel, once finished, will give people an additional incentive to visit, he said. “It will provide people with an extraordinary resort experience and hotel experience for people who come and stay at the inn,” he said.

The project will also restore the largest and most intact fort in the state, according to Deb Andrews, the city’s historic preservation manager.

“That’s what gives this such significance,” she said.

The city owned the barracks and hospital building after seizing them from a previous owner for back taxes. Officials tried for years to get someone to redevelop the dilapidated structures, but developers were reluctant to take on the project. City officials pushed for the hotel plan and a zoning change to allow it.

The project was controversial, as some island residents adamantly opposed a hotel in what they considered their residential neighborhood. They sued to stop it before the litigation was resolved about a year and a half ago, allowing the project to go forward.

Only about 20 year-round residents live on Great Diamond Island, a primarily seasonal community that is part of Portland.

“Although we’ve had some setbacks over the years, our collective enthusiasm never wavered,” Bateman said.

Fire Chief Jerome LaMoria said the state Fire Marshal’s Office is leading the investigation into the cause of the fire.

Stephen McCausland, spokesman for the Department of Public Safety, said the case remains under investigation. “There have been no new developments,” he said.

Randy Billings can be contacted at 791-6346 or at:

rbillings@pressherald.com

Twitter: @randybillings