More than half a dozen times this year, a substitute trustee filed paperwork with the Harris County Clerk showing intention to sell a 25-story Uptown Houston office tower at the soonest foreclosure auction.

But that sale hasn’t happened. And despite a paper trail of bad news, the property could be reaching firmer ground in the form of a loan workout as a new capital environment prioritizing solutions wends its way through the system.

The $80M loan for Houston's One Riverway first moved to special servicing for imminent default in summer 2023.

Then, the 482K SF building lost a law firm that leased 11% of its space in January. Owner Unilev failed to make debt service payment to lender German American Capital Corp. in February, and the loan remains delinquent, according to special servicer comments.

A trustee filed notices in April, May, June, July, August, September and October to foreclose on the building.

But special servicer notes say German American Capital Corp., a subsidiary of Deutsche Bank, and Unilev are suggesting a resolution might be on the way in the form of a workout plan.

A foreclosure sale filing is not necessarily an indication that a property will be foreclosed upon, Morningstar Credit Vice President Matt Bendzlowicz told Bisnow, though recent moves indicate German American Capital is at a point where “they’re not going to waste any more time,” he said.

“They can do those things concurrently,” Bendzlowicz said of foreclosures and solutions. “I would assume, based on the new workout commentary relative to the [restructuring] note, that’s at least a somewhat promising tell as to which outcome may be first, if you will.”

The willingness to work out a loan negotiation shows that there is a perception of value in the building, he said. Filing for foreclosure is procedural, so if there were to be another blow to the building’s value — another tenant moving out, for instance — it would put the lenders ahead in the foreclosure process.

One Riverway is on Riverway Drive, off South Post Oak Lane near Woodway Drive in Houston’s Uptown area. It was built in 1978 and remodeled in 2000, according to Harris Central Appraisal District records, and renovated again in 2015.

While Unilev borrowed $80M to refinance its loan on the building in 2015, the property was appraised at $64M this year, online records show. The loan has a $69M balance, according to Morningstar data.

Special servicer comments from Oct. 1 indicate the parties were finalizing loan renegotiation terms, no longer calling the restructuring “potential.”

“The Lender will continue workout negotiations with the Borrower while dual tracking foreclosure,” the comment says.

The high level of commercial real estate distress across the office spectrum may make lenders more open to these kinds of negotiations, Bendzlowicz said. And they are looking hard at capital stacks to avoid rash moves.

“The sheer quantity right now is allowing some extend and pretend,” he said. “The B note has always been referred to as a hope note.”

Unilev and LNR Securities Holdings, the loan’s special servicer, didn't respond to requests for comment. Deutsche Bank was unable to be reached for comment.