Industrial real estate PE specialist BKM scores $160m for Fund II, eyes $300m for summer final close

Specialist real estate private equity investor BKM Capital Partners has hit a strong first close for its second institutional fund – and is already close to doubling that through ‘soft-circled’ commitments.

The firm said it has collected $135m for BKM Industrial Value Fund II alongside $25m of co-investment capital, and has an additional $100m of soft-circled equity from European and US institutions.

That means the vehicle is on track to hit its $300m target by final close, which is planned for this summer.

LPs to date have included a mix of institutional investors including a US College endowment, US state pension fund, a large US insurance company, a German Trust, US fund of funds and a Canadian family office, according to firm co-founder Nima Taghavi.

He said, “Our first institutional fund, which closed in 2016 and is fully invested, has the same strategy as this second fund of acquiring value-add multi-tenant industrial assets throughout major metro markets in the Western US.

“Fund I had a target net IRR of 15 per cent, but is performing at a 19 per cent net fund IRR.

“Additionally, we recently sold the first three assets in our Fund I, achieving gross IRRs on all three above 37 per cent and multiples that ranged from 2x to 2.5x”.

BKM chief exec and fellow co-founder Brian Malliet added that the success demonstrated by those returns was testament to BKM’s niche strategy, execution platform and the growing understanding and demand for light multi-tenant industrial properties across the US.

He said, “We have an extremely strong pipeline of value-add investment opportunities, and this $160m closing allows us to immediately begin deploying capital.

“By being strategic in our specific focus and operator execution platform, we will capitalize on the growing demand for properties that serve as ‘last mile’ delivery hubs for retailers and industrial users.

“This will maximize returns to our investors while we continue to fundraise over the course of the year.”

BKM has already acquired four assets for the fund, including Hughes Airport Center II in Las Vegas, Activity Business Center in San Diego, Inverness Business Park in Denver and Expo Centre in Sacramento, with two additional assets in escrow.

Malliet said, “Multi-tenant industrial is our bread and butter. We are unmatched in this sector with multiple new software technologies implemented to efficiently manage, track and execute.

“While much of the big box industrial sector has surpassed peak prices, we remain able to identify and acquire assets well below replacement cost, create value, and deliver strong risk-adjusted returns to investors.”

BKM, which was founded in 2013, currently has more than 27 properties under management totaling more than 4.9 million square feet and $626m AUM.