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HOUSTON-Three years after acquiring the 369,479-sf Two Riverway in a value-add move, Coventry Fund X Ltd. has sold the asset to Donerail Corp. of New York City. As the building’s owner changed so did the leasing and management assignment, with Stream Realty Partners LP charged with finishing a lease-up job begun by Transwestern Houston.

Area sources, who were not involved with the deal, say the 17-story Two Riverway in the Galleria submarket traded for $145 per sf to $160 per sf. Locally based Coventry acquired the class A office building in 2005 for $28.5 million.

“They made extensive renovations to the building. There was extensive lobby renovations, renovations to the common areas and a complete gut and rebuild of the bathrooms,” says H. Dan Miller, senior managing director with Holliday Fenoglio Fowler LP in Houston. “After leasing it up, they felt it was time to put it back on the market.”

David Lee, senior vice president with Transwestern, says the building was about 30% occupied when he and senior vice president Brad Sinclair were retained by Coventry in 2006 to lease it up. At the time of sale to Donerail, occupancy stood at 92%.

Two Riverway’s lead tenants are Chicago Bridge & Iron Co. NV, IBM Corp. and Ace Cash Express Inc. “We were proud to have leased more than 200,000 sf within 12 months to create considerable value for the client,” Lee says.

Miller and HFF associate director Martin T. Hogan ended up with a half-dozen offers for the asset. He says Donerail had enough liquidity for a hefty down payment, an important factor in the current capital climate. “They were able to get a low-leveraged loan for the building, but they still had to write a check for basically 50% of the purchase price,” Miller tells GlobeSt.com.

Stream Realty senior associate Ryan Bishop says about 37,000 sf remains to be leased, including the entire second floor, which was once IBM’s cafeteria. “We’re in the process of taking bids on that so it can be converted into true office space,” Bishop says.

The second floor is slightly smaller than the 22,000-sf floor plates throughout the rest of the building. “This would give a smaller company a chance to be a full-floor tenant,” Bishop points out. “There’s a nice upside to that.”

Bishop says the renovation process will start within 30 to 60 days. He adds that, except for a couple of smaller tenants, there is no significant lease roll during the next two years.

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