The real estate firm's value-add vehicle raised $289.4M and is already 46% invested.
BKM Capital Partners has held a final close on its second value-add multi-tenant industrial fund, BKM Industrial Value Fund II, PERE has learned.
The Newport Beach, California-based real estate firm raised $289.4 million for Fund II, $54.1 million of invested Fund II co-investment capital and $38 million in non-discretionary co-investment capital for the strategy. BKM had a $300 million fundraising target.
BKM received commitments from 17 institutional investors, which included a US college endowment, a US state pension fund, a US insurance company, a US fund of funds, a German trust and a Canadian family office. The Montana Board of Investment committed $30 million, according to PERE data.
The expansion of the limited partner base from Fund I to Fund II was a result of the two institutional investors in the predecessor fund giving the firm a strong recommendation to its peers, according to co-founder and executive chairman Nima Taghavi. The two institutional investors from Fund I did not re-up in Fund II themselves, however, because of a shift in investment strategy, he added. BKM also deployed capital following the $160 million first close that PERE reported in May 2018, which provided some asset transparency and encouraged more investors to commit, Taghavi said.
Fund II is nearly three times the size of its predecessor, which was launched in March 2015 and closed on $105 million in February 2016, according to PERE data. Fund I, which has not yet been fully realized, is on track to surpass its 15 percent net internal rate of return target, with the firm anticipating an 18.3 percent net IRR for the vehicle.
Fund II, which is currently 46-48 percent invested, is also targeting a 15 percent net IRR. Like Fund I, it will follow a value-add multi-tenant industrial investment strategy focused on assets in the western US and potentially the Pacific Northwest.
The multi-tenant light industrial parks have spaces ranging from roughly 2,000-5,000 square feet of built-out industrial space with assets containing 20-200 tenants from a diverse range of industries, Taghavi said. Currently no one single industry represents more than 15-16 percent of the Fund II tenant base.
The firm acquires “tired” or neglected industrial properties and adds value by making improvements to the assets. Taghavi believes the firm’s vertically-integrated model is an advantage because these properties are very management intensive. Unlike big box industrial properties, tenant improvements for the units in BKM’s multi-tenant facilities are done upfront when the property is acquired because tenants demand fast, “move-in” ready space, he explained. BKM has local teams that han-dle property management and leasing in order to quickly move tenants in and out of the facilities.
Founded in 2013 by Taghavi and chief executive Brian Malliet, BKM manages more than $1 billion in assets and has a team of almost 90 people.
PERE understands Park Madison Partners acted as a placement agent for this most recent fundraise.