Galleria office tower scheduled for foreclosure

A troubled office building in Houston’s Galleria area appears to be headed for foreclosure. 

One Riverway, a 508,000-square-foot office tower owned by Houston-based investor Unilev, is scheduled to be auctioned off in June, according to records from Roddy’s foreclosure listing service. The building was sent to special servicing a year ago, as default appeared imminent due to low occupancy. 

Another ownership entity attached to the property, South Post Oak Holdings, traces to Azrieli Group, an Israeli real estate investor. 

The $80 million loan, extended in 2015, was packaged into a CMBS deal. In April, though, the CMBS trustee filed a UCC financing statement assigning the loan to a separate LLC, whose address traces to Starwood Capital Group. 

The lender and owner could still negotiate a deal, as a foreclosure has only been scheduled. 

The building is 61 percent occupied, according to JLL. It took a big hit in January, when law firm Thompson Coe left after having occupied about 50,000 square feet. It had been paying about $20 per square foot, well below the Galleria-area average of just under $31 per square foot, according to Fitch.

Other significant tenants that have left recently include Texas Capital Bank, which took 9.6 percent of the space, and South Padre Ventures, which leased 6 percent of the building, Fitch data shows. 

JLL still has a listing up for One Riverway and a nearby tower with the same owner, Three Riverway. The brokers on the listing didn’t respond to a request for comment on the foreclosure notice. 

One Riverside last sold in 2005 for $67 million, almost $132 per square foot. 

Commercial foreclosures are on the rise in Texas. Across the state, some 55 buildings were foreclosed on in March, a 129 percent increase from a year before. Houston’s office market has taken some of the heaviest hits, like the Scanlan Building at 405 Main Street. 

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