'Panicked' builder torched Melbourne hotel

A builder who torched ex-footy star Dane Swan's historic Melbourne hotel, causing millions of dollars' damage, said he was in a panic to finish renovations.

Andrew McMahon has pleaded guilty to arson after he set fire last October to South Melbourne's Albion hotel which he had been contracted to renovate.

On Tuesday, the County Court heard McMahon admitted being in a panic to finish the work three weeks before the hotel's official launch.

"I am sorry, I just thought this would buy me some time," McMahon told police.

"I was just in a panic."

The damage caused more than $5 million damage to the three-storey building, which is over 150 years old. The cost of the Metropolitan Fire Brigade call-out was $336,000.

Prosecutor John Livitsanos said McMahon set the building alight 18 days before the hotel's official launch party, to which thousands of people had been invited.

CCTV footage was played to the court showing the accused circling the building on the day it was torched.

When he finally gained access, he set it alight with a match.

McMahon then called 000 to report the fire, claiming he was assaulted by two masked males as he investigated what he thought was a burglary.

The fire was later deemed deliberate and the accused's injuries were believed self-inflicted.

The defence has called clinical psychologist Patrick Newton to give evidence during the plea hearing.

In his report to the court, Mr Newton said anxiety affected McMahon's ability to think clearly about his conduct and his options, and this detrimentally affected his decisions.

The plea is continuing.