Investment Overview

Marcus & Millichap has been exclusively retained to market and sell 202 South 1st Street, also known as The Reese, a five-story,67,000-square-foot, mixed-used office building located in downtown Harlingen, Texas. The owner spent in excess of seven million dollars completely renovating the property, creating this one-of-a-kind asset in the market. The Reese is 100 percent occupied with three tenants, including a fine dining restaurant, a dental office, and a well-funded non-profit immigration law practice, at below-market rents ($15.57 per square foot). In addition to the capital investment spent by the owner in renovating the property, there are millions invested in tenant improvements by both the owner and tenants providing for Class A finishes in the respective suites. This capital investment by the tenant, along with the level of finish out, provides for a high retention probability given the cost that would be required to relocate. Through this acquisition, a new buyer secures stable cash flow, capital risk mitigation, and upside through annual rate increases and asset appreciation. Over a projected 10-year hold, the new owner has the opportunity to capitalize on what should be a vastly improved economic climate by refinancing at the end of year three while securing a cash out event of two million dollars. For investors seeking an unlevered acquisition, the property is expected to produce an unlevered yield of 9 percent year one and improve to double-digit returns by year five. With our seller financing terms, the new buyer will have the ability to secure: an internal rate of return over 21 percent over the 10-year pro forma hold period, an average cash-on-cash return of 18 percent, and a return on equity of four times their capital investment.