Tauranga's former iconic Kestrel ferry has sunk overnight.

'Ferry flotsam visible on the Waitemata from my morning ferry following the sudden sinking of the historic Kestrel at its berth overnight,” tweeted Auckland councillor Chris Darby.

The Kestrel used to be based in Tauranga before moving to Auckland. File photo.

The area where the ferry has sunk, at its Wynyard Berth, has been cordoned off and pieces of debris can be seen floating on the water's surface.

NZ Herald reports the top of the cabin can be seen amongst the debris.

The Kestrel left Tauranga for the last time on November 30, 2010 after previous owner Mark Scapens sold the former Devonport Ferry to the Kestrel Preservation Society.

The 39m long Kestrel arrived in Tauranga in 2004 and was refitted as a floating restaurant. It was empty for two years before being sold to the preservation society.

The reason the restaurant business failed was revealed in the subsequent trial of Michael Colosimo for fraudulently overstating the financial position of the Kestrel On The Landing bar and restaurant.

In October 2011 he was sentenced to two years and six months in jail after being found guilty by a jury.

Colosimo was found guilty of forging financial documents and using them document for the purpose of selling the business to Michael and Sue Dyke in June 2007.

Judge Peter Rollo said at sentencing that the Dykes contributed to the downfall of the business, but Colosimo in failing to disclose the true profitability of the business played a big factor.

The Dykes bought the business for $400,000 on the basis of the document under a Bay Taxation Services letterhead stating the business made $199,597 before tax between February and November 2005.

Bay Taxation Services accountant Kevin McFadden prepared the document on the understanding it was for a bank loan. His figures showed a before tax profit of $82,120 over the same period.

The Crown said Colosimo's motive was the fact the business was losing $25,000 a month.

After the restaurant failed Mark was unable to find another leasee because the council would not extend the lease and no-one would invest. There wasn't time available to make a return on the initial costs.

The Kestrel Preservation Society intended to return the Kestrel to operational status and carry passengers, something not practical in Tauranga Harbour because of the Kestrel's near three metre draft.

The Kestrel was built at Chas Bailey & Sons yard in Auckland and launched in December 1905 and was the second of the Albatross class of double-ended passenger ferry steamers used for the Devonport ferry service.

The Kestrel is 39m long, 8.7m beam, 2.7m draft, weight unloaded 188 ton. The hull is 75mm Kauri with 25mm Totara outer skin for protection against sea worm.

Mark Scapens leased the Kestrel's site opposite the Fan from Tauranga City Council. A 10 year lease expired in 2014, and Mark was unable to negotiate any extension with Tauranga City Council, which made it an unlikely investment for possible tenants.

There was no longer a slip in Tauranga to provide on-going hull maintenance that a timber ferry like the Kestrel requires.

'Because the Kestrel's engine was decommissioned as part of her placement on The Strand waterfront, she will need to be towed to another port for maintenance. Auckland is now the nearest slip that can maintain a vessel the size of the Kestrel,” Mark said at the time.

Ferry flotsam visible on the Waitemata from my morning ferry following the sudden sinking of the historic Kestrel at its berth overnight.

— Chris Darby (@DarbyatCouncil) March 7, 2016