The owners of the Windsor Hotel say they have received a flood of offers of up to $130 million from those wanting to buy the heritage building.

It comes as the dispute over the Windsor's planned tower redevelopment grows ever more bitter, with mediation between the Victorian government and developer Halim Group abandoned as accusations fly.

Planning Minister Richard Wynne has refused to grant Halim Group an extension to their permit to build a 26-storey tower at the rear of the grand hotel.

On Wednesday he also indicated he would not enter into negotiations and a mediation session scheduled for December 1 was cancelled.

Mr Wynne said there was still plenty of time for the developer to get to work on their permit, which is in place until January 2017.

"I will not be commenting further, Adi Halim and I shook hands and said we would not slug this out in the media and I am a man of my word," he said.

This was later disputed by Halim Group spokesman Michael Smith who accused the minister of leaking information to the media and said "the minister knows that no builder or financier will sign contracts with a permit that does not allow enough time to build."

Halim Group's hotel director Adi Halim has warned the Windsor will close within two years, and could be turned into a backpacker hostel, unless the company is allowed extra construction time for the project.

"I have sought advice on what I can do without a minister's permit because I can't go for another six years of dealing with successive planning ministers who keep changing their mind," he said on Wednesday.

"I can create a backpackers lodge without a permit and it would make more money than the present hotel, but I would do that reluctantly.

"I could create apartments with a permit, but Melbourne has enough of those. The only certainty is the Windsor can't remain as a decent hotel."

In 2010 the Brumby government granted the existing permit to demolish part of the Victorian hotel and build a 93-metre tower opposite Parliament House, but the permit will most likely never be repeated because of newly-introduced height controls.

Mr Smith said the Halim Group was unsure whether it would continue to pursue its case to have the allowed construction period extended by 20 months in the Victorian Civil and Administrative Tribunal.

A similar appeal made during the last government under then planning minister Matthew Guy was unsuccessful.

It is understood a number of offers have been made to purchase the Windsor, including from agents and Asian investors, but all have been knocked back by the Halim Group.

Mr Smith said for many years there had been rumours that the developer was going to "warehouse the permit", or in other words, sell the property for a greater profit with a development permit attached.

"If Halim Group wanted to do that, they would have done it years ago," Mr Smith said.