The partners will now work up a business plan with the council and set up a local asset backed vehicle this spring.
Torbay council will commit land and buildings which will be matched with cash or assets from the private sector partners.
The development will focus on several key sites in Torquay and Paignton and possibly Brixham Town Centre.
Torbay Development Agency chief executive Steve Parrock said: “The decision to appoint two strong and active partners, with the necessary experience and financial ability, will enable Torbay Council and the Torbay Development Agency to put in place robust regeneration plans for reversing the Bay’s economic decline.”
Five sites have been highlighted for the first phase of development. These are the Victoria Centre and Station Lane, in Paignton, and the Terrace car park, Union Street and the Castle Circus area in Torquay.
The council believes that the sites could be turned into a range of leisure, office, retail and residential developments.
Further sites have been identified for a second wave of developments. The local authority said that the list of sites may increase, but added that it would not transfer ownership of any site until an acceptable scheme has been agreed with planning permission.
Nigel Greenhalgh, spokesman for Sir Robert McAlpine and Deeley Freed, said: “Torbay is an outstanding location and we aim to bring investment and secure the type of regeneration the Bay needs to deliver growth and jobs.”
Sir Robert McAlpine has a strong record in the region delivering large regeneration projects including Princesshay in Exeter, Cabot Circus in Bristol and the Eden Project in St Austell.
Deeley Freed has completed numerous projects in the South West, including the Kingsmead Leisure Complex in Bath and Portwall Place in Bristol.