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From the water, Spectacle Island sits in Sydney Harbour like the set of an Agatha Christie novel. Abandoned buildings, rotting on the inside, pepper the small landmass. A gun turret sits rusting in the sun. Water snakes make their homes in the overgrown grass. The only humans to walk the old military outpost are a pair of guards who boat in for their shifts, patrolling 24 hours a day.

Sydneysiders are not allowed to roam the island, one of 13 that dot the harbour.

Now, the defence department wants to off-load Spectacle Island as part of a program to sell dozens of historic properties across the country to raise up to $3bn.

Some, like Victoria Barracks in Sydney, are being scoped by housing developers in a city hamstrung by a shortage of affordable homes, but Spectacle Island’s future is unclear.

“I’m not entirely sure what someone’s going to do with it,” says Peter West, the first assistant secretary of estate transformation, who is in charge of the department’s divestment process.

Defence wouldn’t let the Guardian step foot on the island, citing safety concerns, but in April, West and a few journalists aboard a navy boat were able to sail as close as allowed without drawing the ire of the guards, who mete out warnings that no vessels are allowed to moor within 100 metres, or linger too long.

A fixer-upper

It’s hard to imagine what Spectacle Island could become. The site had served as a military outpost from 1865 to 2023, first as a gunpowder storage facility, then a naval munitions store. It played a key role during the first and second world wars, with nearly 200 ordinance inspectors testing ammunition and gun barrels. At its peak, thousands of workers filled the island’s four dozen buildings, which include workshops, a chapel, residences, and storage facilities.

Those buildings are still standing, maintained superficially for their heritage and historic value. But beneath that neat facade, West says they are effectively “falling down”.

That doesn’t mean a new buyer could come in with a bulldozer. The whole island is covered by one commonwealth heritage listing.

“The first thing anyone’s going to have to do is work with the local government and the state government if necessary to get it rezoned,” West says.

“I think the chance of Spectacle Island being rezoned for use as a billionaire’s playground is probably pretty low.”

Kate Paterson, a heritage consultant an adaptive reuse expert at urban consultancy firm Urbis, says that rather than posing a constraint, the heritage buildings are an opportunity for a unique, once-in-a-generation transformation.

“The buildings can absolutely be repaired and reused. It’s like buying anything, if you want to keep it, you’ve got to fix it,” she says. “Having structures there is a benefit. There’s shelter, there could be cafes, or museums … you’ve got something to work with.”

The redevelopment of neighbouring Cockatoo Island is an example of the best case scenario, she says. A former naval shipyard and convict jail, the island now hosts tourists, campers and the Sydney Biennale.

“The opportunity to have [the islands] working together in some way would be amazing,” she says.

Officials say the defence department may pay to repairs all properties as part of the sale – meaning the $3bn in expected revenue could, after up to $1.2m in remediation costs across 67 properties, be closer to $1.8bn in profit. But West says making money is not the primary goal.

“1.8 billion is not why we’re doing this,” he says.

“Our estate is too old, it’s too big and it’s not in the right places. We need to slim down so we can invest in places where we need it … Some parts of the Defence estate are just history, there’s no reason we’re hanging on to them.”

Spectacle Island, in particular, no longer fits. “We’re paying a small fortune here,” says West.

Selling off the family silver

The landmark is not expected to be ready for divestment for at least two years, and it could be as long as five years until the sale is completed.

West would not name any interested parties, but says a transfer of ownership to an entity like the Sydney Harbour Trust, which manages Cockatoo Island as well other former Defence sites like North Head Sanctuary in Manly and Sub Base Platypus in North Sydney, could be a “neat fit”.

A spokesperson for the trust said that while the sale was a matter for the government, the law does “provide the potential for other commonwealth lands in Sydney Harbour to come under” its stewardship.

Defence agreed to pay about $45m for HMAS Platypus, a former torpedo workshop, gasworks and submarine base, to be remediated. It opened as a community recreation and work hub in 2017.

The NSW government has stayed mum on the future of Spectacle Island, with planning minister, Paul Scully, describing the divestment plans as a “commonwealth government announcement about commonwealth owned land”.

“The Minns Labor government will engage constructively as opportunities arise,” Scully says.

Paterson says no matter the island’s future use, community involvement was a non-negotiable.

“I think the debate and the narrative on what future use is the right use, given that it’s publicly owned at the moment, needs to have input from a lot of different stakeholders,” she says. “I hear the concerns about it going off to private developers, so that process would need to be managed very carefully … for the good of everybody.”

A senate inquiry into the sale of defence properties has heard complaints from locals who oppose the sale of key sites like the Victoria barracks and parts of HMAS Penguin, a naval base in Mosman.

At a public hearing of the inquiry in May, the NSW conservation director for the National Trust of Australia, David Burdon, urged Defence to reconsider the sale of Spectacle Island, Victoria Barracks and other Sydney sites, saying it would be a loss of heritage for “a blip in the budget for one year”.

“We will have sold more than the family silver and, as many submissions have noted, we won’t get them back. So I’d urge the committee, just as the National Trust does, to see the custodianship of these places on behalf of all Australians not just as a responsibility but as an honour, a privilege and most importantly, an opportunity.”

West says Defence has no firm opinion on the island’s future – so long as it no longer remains on its balance sheet.

“One of the great joys about this process is Defence doesn’t actually have to worry about what it’s going to be used as,” West says, acknowledging there is “very much precedent for giving these lands to community and public use”.

One thing that won’t be sold, he adds, are the old military assets

“I’m afraid we have to take all the guns.”