Marcus & Millichap is pleased to present this two-story, single-tenant office building located at 508 South Race Street in Urbana, Illinois. The property consists of a 10,800-square-foot masonry office building that was developed in 1989, and is currently leased to the Illinois Department of Children and Family Services (DCFS). This is a well-maintained building with recent improvements to the ADA compliant elevator. In addition, the interior was refreshed with new paint, carpets deep cleaned, new ceiling tiles, and all light covers cleaned, and the HVAC unit rebalanced to improve efficiency. The property is encumbered by a new five year modified gross lease effective May 1st, 2019, that includes a five year renewal option. The lease includes an inflation guard with two percent rent escalations in years two and four. At an initial cap rate of 10.25 percent, with financing, an investor in this asset can achieve an attractive 17.39 percent cash-on-cash return, and total a return of 22.10 percent.
The DCFS is a mission critical agency in Illinois that is receiving a high level of attention to ensure every child has a strong, healthy attachment to at least one stable, responsible, caring adult. In a press release on May 15th, 2019, Governor JB Pritzker announced dramatic improvements in how DCFS will function and his commitment to quickly overhauling the agency. Program funding that includes both State and Federal funds for the State of Illinois DCFS is projected to increase by 23.5 percent for the period from 2018-2020. The 2019 budget is $1.183 Billion, and will increase to $1.258 Billion for 2020.
Urbana is located in central Illinois and along with its sister city of Champaign is known as Champaign-Urbana. Champaign-Urbana is the tenth most populous city in Illinois outside of the Chicago Metropolitan area. Office rent in Champaign-Urbana posted an average annual gain of 1.7 percent over the past three years. Total employment increased by 1.6 percent or 1,800 jobs. The main campus of the University of Illinois, which is rated as the number 13 public university in the nation, is situated on the Champaign-Urbana border with about 14,000 employees. The Carle Foundation Hospital is a 413-bed regional car hospital with a level one trauma center with about 7,000 employees, and Kraft-Heinz has about 1,000 employees.
- Well-Maintained Masonry Building
- New 5-Year Lease with 5-Year Renewal Option Effective May 1, 2019
- 2% Rent Escalations in Years Two and Four
- 17.39% Net Cash Flow after Debt Service, and 22.10% Total Return
- Busy, Mission Critical DCFS Agency
- Priced Below Replacement Cost