BKM Capital Partners, an institutional fund manager with a niche focus on value-add, multi-tenant light industrial investments, has acquired the RREEF Tempe portfolio, a 305,524 square-foot three-property portfolio in the growing submarket of Tempe, Arizona in an off-market transaction. The portfolio consists of 16 multi-tenant light industrial buildings and was purchased for $24.1 million, which is 34 percent below replacement cost.
Elliot Park 10
This portfolio was acquired as part of BKM Industrial Value Fund I L.P., which closed earlier this year and now has 14 assets totaling more than $155.1 million in assets under management.
“The Phoenix metro is one of the most highly sought after industrial regions in all of Arizona,” says Brian Malliet, CEO and Co-Founder of BKM Capital Partners. “The prime location of these assets coupled with the Tempe submarket’s historically high industrial occupancy will allow us to maximize returns for our investors over time.”
The Tempe submarket currently boasts 93.4 percent occupancy, averaging 91 percent occupancy since 1990. The RREEF Tempe portfolio is 87 percent occupied with in-place rents that are significantly below market, providing an opportunity for BKM to drive value and yields, according to Malliet.
“Our strategy is to capitalize on the growing demand for institutional quality assets throughout the region,” he says. “We plan to execute our proven operational platform in order to lease up current vacant space, bring existing rents up to market value, and integrate key cosmetic upgrades that will immediately increase NOI.”
The acquisition is aligned with BKM Capital Partners’ overall strategy to acquire properties well below replacement costs in growth markets, then stabilize and reposition the assets to create long-term value for investors, according to Malliet.
These acquisitions bring BKM’s holdings in the Phoenix region to 1.3 million square feet. The three-property portfolio acquisition includes:
Twin Business Park
Comprised of two buildings, Twin Business Park encompasses 120,496 square feet of industrial space. Built in 1979 and renovated in 2011, the property is equipped with dock-high loading at every unit, which is extremely rare for a property in its size range, according to Brett Turner, Director of Acquisitions at BKM Capital Partners.
“The asset’s high quality and rare features will command premium rents, further increasing net operating income,” says Turner.
In addition to its amenities, the Twin Business Center is centrally located near Sky Harbor Airport, downtown Tempe, and downtown Phoenix, and provides convenient access to the I-10, I-143, I-202, I-101 and I-60 freeways.
“This prime location will allow us to attract and retain high-quality tenants and quickly lease up the remaining vacant space,” says Turner.
The property is located 1430-1454 and 1602-1638 West 12th Place in Tempe, Arizona.
Ash Business Center
The Ash Business Center encompasses 89,728 square feet and is comprised of nine light industrial buildings. Situated along a major thoroughfare at the corner of the I-60 freeway and Baseline Road, the property is approximately one mile from downtown Tempe.
“This asset’s location and high quality construction made it an attractive investment opportunity within this portfolio,” says Turner. “The property is in excellent condition and easily competes with more recently developed properties in the area, but it lacks key cosmetic upgrades. We plan to enhance the interior and exterior of the building through a series of capital improvements that will further increase property value and drive rent growth for the asset.”
Constructed in 1986, the property is equipped with 16’-18’ clear heights, 16 grade-level doors, 2.7 per 1,000 square feet parking, and 59 percent built-out office.
The Ash Business Center is located at 4666-5010 South Ash Avenue in Tempe, Arizona.
Elliot Park 10
Located at the intersection of the I-10 freeway and Elliot Road, this property consists of 95,300 square feet and five industrial buildings.
The property is currently 80.1 percent occupied with a major tenant, Elite Delivery, occupying 30,000 square feet through September 2019.
“This asset provides a strong opportunity to drive yields by aggressively leasing up vacant space,” says Turner. “Current in-place rents are $0.64 industrial gross, with competitive properties in the area garnering more than $0.82 industrial gross.”
Turner notes that BKM anticipates a significant growth in rents. The firm expects the asset to command a nearly $0.20 industrial gross increase over the next one to two years.
The property is located at 1819-1849 West Drake Drive in Tempe, Arizona, within a mile from Desert Vista Commerce Center, an additional property owned by BKM.
The three-property portfolio was purchased from Deutsche/RREEF and the CIM group on behalf of its client, an institutional investor. Bob Buckley and his team at Cushman & Wakefield represented the seller in the transaction.