Investment Overview

Marcus & Millichap is pleased to exclusively offer for sale 277 Storage. The offering consists of a 122,500 rentable-square foot facility resting on one parcel encompassing approximately 15.70 acres in Abilene, Texas. Originally constructed in 2015 and later expanded in 2020, the property is comprised of 34 office/warehouse units, 120 covered parking spaces, and four uncovered parking spaces. The office/warehouse units are currently leased on a “modified gross” basis, whereby base rent is paid to the property owner, and the utilities are paid directly to the provider. Only a portion of the existing tenants currently have (individually metered) utility service, but all tenants reserve the right to independently establish, install, and maintain such services at their discretion and expense. The facility has a total of 15 metal buildings with garage-style roll-up doors, standing seam metal roofs, perimeter fencing and lighting, a personalized key-pad gate system, camera surveillance, automated remote leasing technology, and wide driveways. Acquisition of the property represents an excellent value-add opportunity in a thriving Texas economy. To be sure, Abilene continues to attract investors searching for reliable yield and capital appreciation within an otherwise highly volatile global market. Abilene has been a major energy producer in Texas for more than 75 years, and investment continues to pour in – as evidenced by Lancium’s (a Houston-based energy technology and infrastructure company) recent announcement that the November 2022 groundbreaking of its “flagship” campus represents only the beginning of what will ultimately be a $2.4 billion investment in the Abilene market over the next five years. Abilene is also the home of Dyess Air Force Base. The base, which currently employs more than 5,000 people, recently announced it will be the permanent home of the new B-21 bomber. The project will bring more than 2,000 additional servicemen and servicewomen to Abilene as they support the Air Force’s scheduled transition away from the B-1 bomber. While the facility’s impressive occupancy history is indeed a byproduct of the visibility it receives from State Highway 277, the dearth of available supply within the facility’s 10-mile trade area magnifies the opportunity to create future value throughout the hold period. In fact, even though the upcoming 2023 delivery of Lone Star Shop and Garage – located approximately one mile north of 277 Storage on Highway 277 (see Rent Comparables on page 30) – will increase the trade area’s total supply by approximately 16,500 square feet, that figure represents only 3 percent of the submarket’s existing supply (see Broker for additional details). Consequently, it is reasonable to assume a new operator will be able to maintain the facility’s historical physical occupancy rate of approximately 90 – 95 percent during (at minimum) the first few years of ownership. It should also be noted that the tenants’ average length-of-stay at 277 Storage exceeds one and a half years. This not only validates the strength and legitimacy of the facility’s competitive market position and its physical location, it represents an avenue through which additional value could be created. To be sure, new tenants (both office/warehouse and covered parking tenants alike) are currently required to sign a one-year lease upon moving in. While the mandate’s presence has almost certainly contributed to the facility’s consistently impressive physical occupancy history, it has also, by extension, unintentionally precluded the current owner from taking advantage of a submarket that appears willing to absorb strategic escalation of unit rental rates. When this is considered alongside the fact that the services of a third-party management company have never been explored (even though a number of firms specializing in self-storage and/or industrial property management have expressed an interest, and could be immediately retained), at a purchase price of $7,300,000, the end year-one and pro forma unleveraged returns of 6.25 percent and 7.01 percent contained herein appear realistically attainable despite the fact that the financial model includes a deliberately increased economic vacancy factor of 10 percent.