Trouble is brewing again for three historic properties on the 1900 block of Sansom Street. New owners Southern Land Company and 1911 Walnut Street, LLC filed an economic hardship application with the Philadelphia Historical Commission on October 29th seeking approval to demolish the Rittenhouse Coffee Shop, the Warwick Apartment House, and the Oliver H. Bair Funeral Home. All fall within the Rittenhouse-Fitler Residential Historic District and are considered historically significant. The Nashville, Tennsesse based real estate firm led by CEO Tim Downey purchased the properties at 1906-1920 Sansom Street, and the L-shaped empty lot between 1907-1914 Walnut Street that has sat empty since 1994 after a six-alarm fire burned down the UA Eric Rittenhouse theater and Metropolitan Reporting Bureau building, for $40 million from Castleway Properties in February 2015.

Being listed on the Philadelphia Register of Historic Places confers legal protection against demolition for these properties. To prove economic hardship, according to the Philadelphia historic preservation ordinance, Southern Land Company would have to prove that “the Properties cannot be used for any purpose for which they are or may be reasonably adapted because the sale of the Properties is impracticable, commercial rental for the Properties cannot provide a reasonable rate of return, and other potential uses of the Properties are foreclosed.” However, in several recent cases, the Historic Commission has approved hardship for lower threshold claims.

In Philadelphia, Southern Land recently finished construction on a 28-story luxury apartment tower at 3601 Market in partnership with Redwood Capital Investment LLC and the University City Science Center. That project was the company’s first development project in the city. Since this summer, Southern Land has slowly been leaking plans about the Rittenhouse project: a residential tower on the Walnut Street lot extending north to Sansom Street with 102 feet of Walnut Street frontage for retail. The company previously stated that it was committed to preserving the buildings at 1906-1920 Sansom. Shortly after the deal was closed a spokesperson for the real estate firm told James Jennings, the real estate blog editor at Philadelphia Magazine, that “Southern Land intends to work with the historic commission restore the Rittenhouse Coffee Shop and Warwick.” Eight short months later Southern Land has changed its tune, implying that preservation of the iconic block was never part of the plan. It has been reported that the company began conducting drone aerial surveys of the collective parcels earlier this spring. Patrick Grossi, director of advocacy for the Preservation Alliance for Greater Philadelphia, says, “We’re certainly looking into it, doing our due diligence.”

In July, the company drew an uproar among the preservation community in Denver over the demolition of an historic 1.5-acre site in Uptown developed between 1885 and 1928 that includes a 115-year-old tavern and storefront for an eight-story, 315 unit apartment project. Similar to its strategy in Philadelphia, in Denver the company presented mixed messages about their redevelopment intentions for the historic properties before pursing demolition.

Yesterday, the company released an official statement to Hidden City addressing the hardship application. “At Southern Land Company, we strongly support historic preservation efforts. Regrettably, after extensive investigation of the buildings located at 1904 Sansom Street, 1906-16 Sansom Street, and 1918-1920 Sansom Street, we have concluded that the buildings are in extremely poor condition, with serious structural, material, mechanical, and environmental problems, and pose significant safety concerns. As such, on October 29, an application was submitted to the Philadelphia Historical Commission to approve the demolition of the three buildings due to the financial hardship associated with the inability to reasonably reuse the buildings. We are working closely with the Center City Residents Association task force, Rittenhouse Plaza, city officials and other stakeholders including businesses, preservation and neighborhood associations to achieve a result at the property that will be of maximum benefit to the community.”

It isn’t clear why the building issues weren’t uncovered during the due diligence phase of acquisition. Moreover, one test of hardship is that the developer can’t market the property. But Southern Land’s own acquisition of the site is proof of its marketability as is.

To support its hardship claim, the company cites an environmental report by the engineering firm Pennoni Associates, which states that the cost of remediation for the three buildings (removing asbestos-contaminated material, lead based paint, pigeon guano, and mold blooms) would require an estimated total cost of $1,610,000 (Rittenhouse Coffee Shop: $49,030, Warwick: $1,455,470, Bair Funeral Home: $105,500).

Solomon Cordwell Buenz Architects, which performed reuse scenarios for the properties, concluded that redevelopment of the properties did not create enough value to justify costs. Scenarios for the reuse of the coffee shop and funeral home as retail space, single-family dwellings, and offices hovered around a $3.5 million loss. The report alleges that redeveloping the Warwick for apartments, condos, offices, or a hotel would incur $17.8 million in lost revenue. It isn’t clear if “lost revenue” is an opportunity cost for not developing a cleared site or an actual cash loss on investment.

In its Structural Condition Assessment Report, Keast & Hood Structural Engineers assessed that all three buildings are in “very poor condition” and suffer from water infiltration, advanced wood decay, masonry deterioration, decaying wood joists, significant mold, and overall building material moisture saturation.

Southern Land concludes in its hardship application that adaptively reusing the buildings is cost prohibitive. The company would incur a significant economic loss if preservation and redevelopment were undertaken, it claims. It maintains that demolition of all the buildings is appropriate and necessary. In doing so the company would free up roughly an acre of connected, open parcels–an attractive footprint for a developer to own in the heart of Rittenhouse Square.

The “Sansom Three” has been to this rodeo before. In 2003, the Historical Commission approved demolition of the three buildings in favor of a $35 million development plan proposed by former owner Philadelphia Parking Authority. The proposal included an eight-screen Ritz movie theater, 500 space parking garage with 6,000 square feet of street level retail, and a 1,200 square foot restaurant. Only the ornate, terra cotta façade of the Rittenhouse Coffee Shop was required by the Commission to remain and be incorporated into the design. The full Commission’s decision ignored the advice of both Historical Commission staff and the Commission’s Architectural Committee, which had recommended that the demolition request be denied.

The Philadelphia Court of Common Pleas repealed the Commission’s approval in 2005 after the Preservation Alliance for Greater Philadelphia and real estate investor Michael Singer filed an appeal. In his decision to reject the PPA’s development plan, Judge Matthew D. Carrafiello wrote that demolishing historically significant buildings was not in the public’s interest and that economic advantage was not enough to overrule the city’s historic preservation ordinance. “Virtually any historic building in Philadelphia could be demolished when a more economically advantageous use could be foreseen,” wrote Judge Carrafiello.

Castleway Properties of Ireland bought the properties from the PPA in 2007 for $36.7 million with plans for a 50-story mixed-use tower that included 150 condominiums, ground floor retail, and a hotel. The project stalled with the onset of the economic crisis of 2008. Despite the Pennsylvania Horticultural Society’s pop-up garden on the site in 2012 and Toll Bros. interest in developing the empty parcel for a hotel and condominium tower in 2013, the properties and lot have sat vacant since.

At the time of this story’s publication, Historical Commission officials stated that they have not begun reviewing Southern Land’s hardship application.