A New York-based developer who outbid real estate investor Dean Adler and Philadelphia’s PMC Property Group for control of the huge office complex at Centre Square has decided to walk away from the property.
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Centre Square, one of Philadelphia’s largest office buildings, saw soaring vacancy after the COVID-19 pandemic and went into foreclosure in 2023.
In February, Adler announced that in partnership with PMC, he would buy the 1.76 million-square-foot office complex at 1500 Market St. for $70 million and transform it into a mixed use mecca with hundreds of apartments and hotel space. The previous sale price in 2017 had been $328 million.
Then in May, the Philadelphia Business Journal reported that Manhattan-based CSC Coliving had bid $80 million for the project. CSC, too, planned a mix of residential, hotel, and office space.
“We were kicked out, and we didn’t fight it. We played by the rules,” Adler said. “We accepted when they were going to overbid us.”
On Thursday, the managing partner of CSC said his company had decided against the project.
“We backed out from 1500 Market,” said Salomon Smeke, managing partner and co-founder of CSC. “The tax abatement incentives in Philly were not enough to justify the conversion.”
Smeke said that “it would help” if a 20-year property tax abatement, like the one Mayor Cherelle L. Parker has been considering, were in place.
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Asked for his reaction to CSC’s decision, Adler says that while he is still theoretically interested in the property, he will need to take another look to get a sense of why his competition backed out.
“Are we still interested? We are always interested,” Adler said. But he also said he would need to do more research.
“We are going to take our time,” Adler said. “I got to find out if there’s something we missed. Maybe they found something that we didn’t know, so we have to go back to do more homework.”
Adler has been on a roll of dramatic and ambitious adaptive reuse projects with his former company Lubert-Adler Real Estate Partners, transforming Philadelphia landmarks into mixed-use campuses, notably at the Bellevue Hotel on South Broad Street and the The Battery on the Delaware River.
In these projects, Adler has championed a mix of residential, hotel, office, restaurant, and wellness.
Adler is also locked in a dispute with his former partner Keystone Property Group over the Bourse on Independence Mall, which he hoped to turn into another mixed use hub.
The Centre Square project would have been CSC’s largest project in Philadelphia. The developer is known in Philadelphia for its purchase of the former International House in University City, rebranded as the Mason. CSC then toyed with the idea of turning the 3701 Chestnut St. tower into a drug and alcohol rehabilitation center.