IRVINE, CA—As GlobeSt.com reported exclusively last month, BKM Capital Partners—the real estate arm of the Niru Group and a fund manager and operator platform targeting value-add, multi-tenant industrial real estate in the Western US—has acquired three multi-tenant industrial parks with a combined capitalization of $42.8 million on behalf of BKM Industrial Value Fund I LP. The parks mark the first three assets to be included in the commingled fund, which targets final close in March 2015 and intends to acquire approximately $300 million of assets in the product type by the end of next year. In the wake of this purchase, GlobeSt.com caught up with Brian Malliet, CEO and co-founder of BKM, to discuss the types of industrial assets his firm looks for and what the firm's acquisition and growth strategy is.

GlobeSt.com: As a fund manager, how does BKM Capital Partners approach its acquisitions?

Malliet: We're a fund manager and operator specializing in value-add, multi-tenant industrial real estate. We look for distressed, “broken” assets in the marketplace, and we don't buy in the fully leased-up core product type. Any acquisition we underwrite has to have a broken aspect to it. We fix what's broken and lease it for today's rent. Then we look for the next asset. We pass on it if needed. We look for a broken capital structure, if there's not enough equity in the asset or the current owner doesn't have the capital to pay for it or can't refinance if they're upside down. The second big thing we look for besides the capital structure is the ownership hands the property is in. If you don't have the right owner, one who has a hands-on, boots-on-the-ground approach, you'll lose occupancy.

GlobeSt.com: What are the real estate services your firm provides in-house to optimize its properties?

Malliet: We're a full-service platform, not a fund-of-funds type investment manager. We have an operating platform where we do all the property management, all the rehab and construction work and everything needed to turn the property around. Unlike most fund managers who hire it out, we do it all in-house as an operating platform vs. a fund-of-funds platform.

GlobeSt.com: What expertise does BKM bring to its investors?

Malliet: From an expertise standpoint, we have over 25 years of history in this very specific niche. I've done multi-tenant industrial product for the last 25 years. With that, I've played three different roles: as a broker for a decade in this particular product type; as a principal or investor on the ownership side, buying assets during the downturn, fixing them up and selling them; and as a developer who has entitled, developed, leased and sold properties. Unlike some other investment-fund managers, we bring three different perspectives of ownership to the table. Not a lot of investment-fund managers have gone through all three of these aspects, but we're able to execute through all the different phases of ownership.

GlobeSt.com: Which markets hold the most interest for you and why?

Malliet: We're a West Coast-based investment fund manager, so we invest in six Western states in markets that are interesting: the Pacific Northwest—a secondary market that gets overlooked somewhat because it's a smaller market, but the price per square foot and cap rates are good; also, Phoenix and Las Vegas because they were the most heavily hit and saw the biggest drop in value and lease rates during the downturn.

GlobeSt.com: How is your firm's acquisition strategy and service unique from other fund managers?

Malliet: You have to have a boots-on-the-ground type of operating platform to execute on our very specific niche of multi-tenant business parks. In the multi-tenant space, you may have 40 to 50 tenants, and you need expertise to manage on-site, achieve your rent goal and create profitability. 

GlobeSt.com: What plans do you have for the future of the firm?

Malliet: We're looking forward to having institutional investors invest in our company's first-time fund. Generally it's difficult to attract institutional investors to a first-time fund. We've been very successful already in our first 18 months in raising capital and acquiring assets at the same time. It's tough to align both. About 400-plus funds a year try to get funded, and about 110 of them meet their capital raising targets. We see specificity of focus as a big difference between the groups that get funded and those that don't. By focusing on a very specific product type and investment model, we hope to have an advantage in achieving our goals.