Houston Galleria office tower expected to be foreclosed

A troubled office building in Houston’s Galleria neighborhood appears to be on the verge of foreclosure.

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

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

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

The lender and homeowner could still negotiate a deal because a foreclosure has only just been scheduled.

The building is 61 percent occupied, according to JLL. That took a big hit in January, when law firm Thompson Coe vacated its premises after occupying about 50,000 square feet. He paid about $20 per square foot, well below the Galleria area average of just under $31 per square foot, according to Fitch.

Other major 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, according to Fitch data.

JLL still has a listing for One Riverway and a nearby tower with the same owner, Three Riverway. The brokers on the list did not respond to a request for comment on the foreclosure notice.

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

Commercial foreclosures are on the rise in Texas. Statewide, some 55 buildings were foreclosed on in March, an increase of 129 percent from the previous year. Houston’s office market was among the hardest hit, such as the Scanlan Building at 405 Main Street.