BKM Capital Pays $79M for Industrial Parks
The assets are located in Phoenix and Silicon Valley.
BKM Capital Partners, a Newport Beach, Calif.,-based institutional fund manager, has expanded its presence in the Western U.S. with the acquisition of three multi-tenant industrial parks in Phoenix and Silicon Valley for a total of $79 million, in two separate deals with Stockbridge Capital Group.
In the larger of the transactions, BKM purchased Gateway University Park I & II with a total of 268,409 square feet in the Airport submarket of Tempe, Ariz., for $48 million. Located at 1605-1635 and 1705-1797 W. University Drive, the properties consist of 16 tilt-up buildings with 81 units ranging in size from 1,712 to 22,352 square feet. Built in 1982 and 1983, the buildings have two dock-high and 106 ground-level loading doors, clear ceiling heights of 16 to 22 feet and an above average parking ratio of 3.73 spaces per 1,000 square feet.
The property is 99 percent leased to 77 tenants. Noting that current in-place rents are 36 percent lower than market rate, BKM said it plans to leverage the property’s weighted average lease term of 2.7 years to bring rents up to market rate over its hold period. The firm also intends to reduce the office space from 54 percent of net rentable area to 35 percent.
BKM plans to spend about $2.4 million on capital improvements including upgrades to roofs, parking lots, landscaping, HVAC systems and updates to the signage and paint scheme.
The industrial parks are located adjacent to key logistics hubs including Phoenix Sky Harbor International Airport and I-43/I-60-10/Loop 202, providing last mile capability for tenants and giving them access to the fastest growing population centers in the country.
BKM also notes the growing semiconductor industry in the region that should provide trickle-down benefits to nearby light industrial markets. Phoenix industrial rents have already grown by 59 percent between 2020 and 2022, according to Green Street Advisors. Among the major companies committing to projects in the region are Intel, Taiwan Semiconductor Manufacturing Co., NXP Semiconductor and ON Semiconductor.
Brian Malliet, BKM CEO, said in prepared remarks the acquisition of Gateway University Park, one of the largest single-asset concentrations of multi-tenant industrial space in the submarket, bring the firm’s Phoenix-area holdings to 2.7 million square feet across 15 properties. He said nearly 1 million square feet of that space is located within a 5-mile radius of Gateway.
The deal was brokered by Cushman & Wakefield’s National Industrial Advisory Group, including Will Strong, James Carpenter, Kirk Kuller, Robert Buckley, Tracey Cartledge, Michael Matchett and Molly Hunt.
Silicon Valley Space
BKM also acquired Junction Business Park, a two-building, multi-tenant industrial property with 119,101 square feet in San Jose, Calif., for $31 million. Located at 1911-1943 Hartog Drive and 1914-1968 Junction Ave., the business park was completed in 1978. It has 16 units ranging in size from 6,156 to 12,672 square feet. There is about 30 percent office space at the site. The property has 16 grade-level and 14 dock-high loading doors, 16-foot clear heights and an above-average parking ratio.
Malliet stated BKM now owns more than 900,000 square feet of space in five properties throughout Northern California. He said Junction Business Center aligns perfectly with BKM’s investment strategy of identifying a well-located light industrial asset, buying it at a significant discount to replacement cost and leveraging its expertise and resources to maximize its value.
The firm plans to make about $1 million in capital improvements to bring it up to Class A standards. Plans call for upgrades to HVAC systems and parking lots, as well as improved landscaping, signage and paint schemes. BKM has also budgeted $873,000 in tenant improvements to elevate unit interiors to brand standards to attract premium industrial users. The property is currently fully leased to 13 tenants. The firm intends to take advantage of a 2.5-year WALT to correct an 18 percent market rent deficiency over a four-year hold period.
The property is located adjacent to San Jose International Airport, the Port of Oakland, US-101 and I-880, providing access to both international and domestic markets.
The sale was brokered by Cushman & Wakefield’s National Industrial Advisory Group, including Jeff Chiate, Rick Ellison, James Carpenter, Will Strong, Scott Prosser, Steve Hermann, Jack Depuy, Mike Adey, Brad Brandenburg and Matt Leupold.
The new acquisitions come several months after BKM formed a partnership with StepStone Real Estate, the real estate arm of the global private markets investment firm StepStone Group, for a GP-secondary direct transaction. SRE acquired interests in two BKM industrial properties and committed to future investments in small- and mid-bay light industrial assets.
Earlier in 2023, BKM teamed up with Investcorp to acquire seven light industrial assets in Las Vegas for $157.8 million from Terry York Properties. In July, BKM purchased an eight-building industrial park in Carlsbad, Calif., from Alexandria Real Estate Equities for $44 million.