SAN DIEGO, Calif., (September 4, 2018) – BKM Capital Partners, an institutional fund manager with a niche focus on value-add, multi-tenant light industrial investments, has acquired the Otay Mesa Industrial Portfolio, a six-property industrial portfolio that encompasses 14-buildings totaling 703,215 square feet in the Otay Mesa submarket of San Diego, California.
“This was a rare opportunity to acquire a portfolio of critical mass at a discount to its replacement cost in one Southern California’s fastest growing submarkets,” says BKM Capital Partners CEO and Co-Founder, Brian Malliet. “Otay Mesa has undergone rapid expansion over the last few years and is poised for long-term growth. In fact, industrial vacancy in the region is at an all-time low of 4.5 percent and industrial rents have increased by more than 16-percent in the last two years alone.”
The Otay Mesa Industrial Portfolio is strategically located adjacent to the USA-Mexico international border, which is one of the busiest border crossings in the Western Hemisphere with an estimated $243 billion of goods exported across it each year.
“This strategic location provides tenants with unmatched access across the border, as well as direct access to the SR-905 and I-5 freeways,” explains Malliet. “Major corporations such as Kraft, Sharp, Bose, General Dynamics and Camelback have already taken large positions in Otay Mesa in order to bolster access to key components of the supply chain. With the opening of the new Port of Entry to Mexico (Fwy-11) in late 2019, demand for high-quality industrial assets in the region will continue to grow, further placing upwards pressure on rental rates.”
The multi-tenant industrial portfolio is currently 97-percent occupied by a diverse range of 44 different tenants with in-place rents approximately 24-percent below market value.
“The nearly fully-occupied asset provides immediate stabilized cash flow while the diversification among tenants, staggered lease expirations, and varying unit sizes limit rollover exposure,” says Brett Turner, Director of Acquisitions at BKM Capital Partners. “Additionally, more than 60-percent of lease expirations are scheduled to expire in the first 3 years, which will allow BKM to quickly increase NOI by bringing rents up to market as leases roll.”
BKM Capital Partners also plans to implement a series of cosmetic capital improvements to the property including new paint, landscaping and signage as well as structural improvements such as updated HVAC systems and new roofs.
“These properties are highly functional assets that are in need of a refresh or modernization,” says Turner. “This is consistent with our strategy of acquiring distressed, institutional-quality assets in strong locations where we can create value through strategic renovations and hands-on management.”
The Otay Mesa Portfolio is comprised of six properties located at:
Borderpoint Business Park, 6754, 6744 & 6794 Calle De Linea
San Diego International Center, 8830 Siempre Viva Road
Faraday Industrial Park, 2325, 2345, 2365, 2375 Michael Faraday Drive; 2350 Marconi Place
Otay Business Center, 6987 & 6995 Calle De Linea
Frontera Business Center, 2695 Customhouse Court
Otay Crossing Business Park, 2340 Enrico Fermi Drive & 10025 Siempre Viva Road
Cushman and Wakefield represented the seller, Stockbridge Capital Group.
About BKM Capital Partners
BKM Capital Partners was founded in 2013 by Brian Malliet and Nima Taghavi. Headquartered in Newport Beach, California, BKM Capital Partners is a fund manager specializing in the acquisition and improvement of value-add multi-tenant industrial properties in metro areas across the Western U.S. Combining a deep knowledge of this niche industrial product type with an operator platform that includes in-house capabilities including on-site property management, asset management, and construction management, the firm continues to build on its proven track record, generating strong results with high levels of transparency and engagement for investors. Additional information is available at www.bkmcapitalpartners.com.