Treacy and his father, Michael Sr., a local builder, were part of an investor group that paid $10 million in 2006 for the 118-year-old building and land. The other partners were Sunergy Housing, a Dutch firm, and Michigan-based NSI Real Estate Group.
The partnership had ambitious plans to restore the hotel and build residential towers on the vacant lot. But the economic downturn derailed the project.
"The financial collapse made it impossible to get funding to do the project," Treacy said.
In recent months, political pressure has been building for the owners to sell the blighted property.
Mayor Nutter last Monday told the Greater Philadelphia Chamber of Commerce that the Divine Lorraine was standing in the way of a rebirth of North Broad Street and that he wanted to see it restored.
The current owners owe the city $702,779.82 in back taxes and defaulted on a construction loan from the union-owned Amalgamated Bank of New York.
Treacy said the option with the Philadelphia developer was "arranged with the bank and us."
This is the fourth potential deal to sell the Divine Lorraine in recent years, Treacy said. He did not know what the plans might be for a new owner.
Contact staff writer Jennifer Lin at 215-854-5659, firstname.lastname@example.org, or j_linq on Twitter.