BKM Capital Partners Executes $261 Million Recapitalization with Investcorp
BKM Capital Partners Executes $261 Million Recapitalization with Investcorp for Multi-State Industrial Portfolio
California-Based CRE Firm Completes Full-Cycle Investment on Initial Multi-Tenant Industrial Asset Fund Launched in 2013, Creates Highly Desired Institutional-Caliber Investment Portfolio
September 1, 2021 – Newport Beach, Calif.-based BKM Capital Partners executed a $261-million recapitalization of its value-add industrial Fund I, expanding a partnership with Investcorp and marking the successful completion of an investment thesis involving the fund managers’ first fund. The flagship investment vehicle launched in 2013 and is currently comprised of seven multi-tenant industrial assets totaling roughly 1.3 million square feet of space in top-tier industrial markets. A joint venture between Investcorp and BKM Capital Partners acquired the Portfolio.
BKM Capital Partners’ Brian Malliet, CEO and founder, said, “This recapitalization of BKM’s Fund I is the true definition of win-win. We are incredibly proud of our ability to execute a full-circle investment on our first fund that generated remarkable results and resoundingly upheld our investment thesis. That process started with the formation of this portfolio, continued through stabilization, including completion of necessary capital improvements and lease-up, all the way to delivering impressive returns to our Fund I investors, as well as presenting an institutional-caliber investment opportunity that appealed to Investcorp.”
“Investcorp moved quickly and decisively to capture an opportunity to control a critical mass of institutional-quality, multi-tenant industrial product in two highly desired industrial growth markets of Seattle and Phoenix,” said Herb Myers, Co-Head of Real Estate North America at Investcorp. “We look forward to the expansion of our partnership with BKM through this investment.”
Multi-tenant parks attract a growing entrepreneurial tenant base, cater to numerous users and allow for growth within the park, typically leading to higher tenant retention and a lower risk profile for owners.
“Completing the monetization of our first fund is a significant milestone for BKM. The outstanding performance BKM achieved for Fund I investors is remarkable, especially given the turmoil caused by the pandemic last year,” said BKM’s Brett Turner, who notes the fund out-performed target returns. “Fund I absolutely exceeded its investment thesis objectives. We recognized that there is still value to be harvested and are confident Investcorp is the right partner to execute on that strategy.”
The assets held in Fund I encompassed five properties in Metro Phoenix and two in Seattle, two core light industrial markets. The Fund I portfolio houses a diverse tenant base of roughly 450 tenants and is 93% leased.
The properties include:
· Black Canyon Business Park in Phoenix: 11 buildings totaling 170,816 square feet
· Rose Garden Business Park in Phoenix: Nine buildings totaling 157,604 square feet
· Twins Business Park in Tempe: Two buildings totaling 120,496 square feet
· Metro Industrial Center in Phoenix: Five buildings totaling 113,822 square feet
· Ash Business Center in Tempe: Nine buildings totaling 89,728 square feet
· Seattle Exchange I in Tukwila, submarket: 27 buildings totaling 478,435 square feet
· Seattle Exchange II in Tukwila, submarket: 11 buildings totaling 183,162 square feet
The Fund I portfolio of quality, infill last-mile assets offers the opportunity for rent growth, in part since there’s been virtually no new construction of smaller-bay industrial product in these in these high-density urban areas of Seattle and Phoenix. The portfolio’s large tenant base and short lease terms provide smooth rent rollover profiles.
The collaboration and synergies created between Investcorp and BKM Capital Partners emerged earlier this year and helped form the foundation for this Fund I recapitalization. In Q1 2021, Investcorp acquired Tempe Commerce Park, a five-building, 536,051-square-foot, multi-tenant, light industrial park in Tempe, Arizona, from BKM Capital Partners.
BKM Capital Partners is one of the first fund managers to venture into the value-add, light industrial, multi-use logistics asset class, in the process unearthing new opportunities and cultivating success. The asset class requires a hands-on, vertically integrated operating platform, which BKM built over the past seven years. That includes a team capable of managing the space and relationships of significantly more tenants than single-tenant industrial facilities.
Based on the success on BKM’s inaugural Fund I, and continued maturation of Fund II, BKM plans to launch Fund III, the next investment vehicle in its light industrial value-add series, in Q1 of 2022. The appetite for multi-use logistics product as an institutional-grade asset class is growing among institutional investors due to the tenant diversification, strong underlying fundamentals, and ability to generate out-sized cash-on-cash yields through active management.
CBRE’s Darla Longo, Barbara Perrier, Brett Hartzell, Rebecca Perlmutter, Joe Cesta and Eric Cox handled the Fund I listing for BKM. Local market expertise was provided by CBRE’s Sean Durkin, Jackie Orcutt and Bill Bayless, while CBRE’s James Millon and Tom Traynor provided debt and structured finance advisory services.
Longo said, “BKM’s Fund I portfolio was well received in the marketplace, ultimately generating interest from a number of high-quality, institutional buyers seeking to expand their holdings into an asset class in which Brian and the BKM team has established a strong presence and successfully built an industry-leading operating platform around.”
Investcorp is a global investment manager, specializing in alternative investments across private equity, real estate, credit, absolute return strategies, GP stakes and infrastructure. Since our inception in 1982, we have focused on generating attractive returns for our clients while creating long-term value in our investee companies and for our shareholders as a prudent and responsible investor.
We invest a meaningful portion of our own capital in products we offer to our clients, ensuring that our interests are aligned with our stakeholders, including the communities that we operate within, towards driving sustainable value creation. We take pride in partnering with our clients to deliver tailored solutions for their needs, utilizing a disciplined investment process, employing world-class talent and combining the resources of a global institution with an innovative, entrepreneurial approach.
Investcorp has today presence in 12 countries across the US, Europe, GCC and Asia, including India, China and Singapore. As of June 30, 2021, Investcorp Group had US $37.6 billion in total AUM, including assets managed by third party managers, and employed approximately 430 people from 45 nationalities globally across its offices. For further information, visit www.investcorp.com and follow us @Investcorp on LinkedIn, Twitter and Instagram.
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The material provided herein is for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any interests in the Fund or any other securities. Past investment results should not be viewed as indicative of future performance.