BKM Capital Partners, an institutional fund manager with a niche focus on value-add, multi-tenant light industrial, has acquired four industrial business parks encompassing 442,173 square feet in the Phoenix metro area for a total consideration of $34.45 million. The firm, which recently announced the final close of its debut institutional fund, BKM Industrial Value Fund I L.P., now has more than $150 million in assets under management.
“The ability to source off-market opportunities in the current market is what sets a good fund manager apart,” says Brian Malliet, CEO and Co-Founder of BKM Capital Partners, who notes that a recent report by Preqin indicated that finding investment opportunities would be the most difficult challenge for private real estate managers in 2016.
“We are bucking the trend,” Malliet says. “As opposed to a slowdown, we are nurturing a growing pipeline of off-market investment opportunities, and have already invested roughly 50 percent of our equity in assets just six weeks after the Fund closed. The off-market acquisition of these four high-quality properties in the dynamic Phoenix market will add deep value to our growing portfolio, and we are eager to demonstrate proven returns in our multi-tenant light industrial product niche.”
BKM Capital Partners’ recently acquired properties include the Rose Garden Business Park, Metro Industrial Center, and 4100 Broadway in Phoenix, as well as the Arizona Corporate Center in Chandler, Arizona. With these acquisitions, the firm now has nearly one million square feet under management in the Phoenix market.
“Arizona ranked as the number one state for future job growth by Forbes last year and Phoenix is at the center of that. The growing population of residents and employers indicate an opportunity for active value creation over the next two to three years,” Malliet says. “We were able to acquire the assets well below replacement costs and below historical peak pricing. Moving forward, we will use our operator model to turn each asset around, stabilize it and bring in strong returns upon stabilization. Our seasoned team has a proven track record in executing within this specific niche.”
The combined occupancy of the four assets BKM acquired is 69 percent, providing a strong opportunity for value creation, according to Brett Turner, Director of Acquisitions for BKM Capital Partners, who was responsible for sourcing and acquiring the deal.
“We plan to implement significant interior and exterior improvements to attract new tenants and retain existing tenants, ultimately pushing rents up to market rate,” Turner explains.
Planned upgrades include new landscaping, paint, signage, roof, HVAC and asphalt updates as needed.
“In addition, BKM will build out spec tenant improvements in vacant suites to demonstrate the potential of the space in each asset,” says Turner. “By improving each property, we will be able to attract strong, quality tenants that will deliver deep value and strong NOI over time.”
BKM acquired the four assets in a portfolio transaction from a private Los Angeles-based owner. With this portfolio of assets, BKM now boasts 11 assets in the BKM Industrial Value Fund I with four more assets in escrow at roughly $25 million combined.