BKM Buys Three, Intends to Buy $300M

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IRVINE, CA—GlobeSt.com has learned exclusively that 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.

The first three acquisitions, in which BKM represented itself, are Hayden Island Business Park in Portland, OR; Patrick Commerce Center in Las Vegas; and Black Canyon Business Park in Phoenix, on which GlobeSt.com reported in August. Hayden Island is a 98,516-square-foot property that was at 84% occupancy when BKM purchased it for nearly $6 million from the heir of a private investor who was represented by David Hill of Newmark Grubb Knight Frank. The property, located at 2400-2422, 2511-2527, 2535-2541 and 2701-2703 N. Hayden Island Dr., “has virtually not competition and is adjacent to a major auto auction site that supports dozens of related businesses nearby,” according to Brett Turner, BKM's director of acquisitions. “While the property was already at a positive cash flow when we acquired it, it was leased at rents 40% below current market rates. With the right leasing, management and capital improvements, we anticipate re-leasing the park to capacity and obtaining much stronger rental rates.”

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Patrick Commerce Center, a 223,009-square-foot business park, was acquired for $15.1 million from a public REIT represented by Bret Hardy and Rick Putnam of Colliers International. The property, located at 2875 and 2925 E. Patrick and 6151, 6171 and 6231 McLeod in Las Vegas, had just dropped to 55% vacancy prior to BKM's purchase. “Again, in a market in which the vacancy rate is at 11% and headed lower, BKM will be able to quickly lease the property up to above 90% occupied, increasing underlying property value,” says Turner.

Lastly, the 219,410-square-foot Black Canyon Business Park had lost its two main tenants within a few months of one another, dropping occupancy from 95% to 34%. With the property in need of major renovations, BKM was able to acquire the asset for $13.1 million from a private individual who was represented by Robert Buckley, Tracy Cartledge and Steve Lindley of Cassidy Turley. On this property, located at 8102, 8155 and 8055 N. 24^th Ave.; 8027 and 8041 N. Black Canyon Fwy.; and 2328, 2338, 2410, 2311, 2321 and 2331 W. Royal Palm Rd, “we will invest over $5 million to rebuild dividing walls and separate the available rental spaces back into traditional multi-tenant industrial-park spaces,” says Turner. “More easily leasable space will lead to improved performance by the asset.”

According to Brian Malliet, CEO and co-founder of BKM, “We are active on both the acquisition and capital-raising fronts as we near the close of a productive 2014. I believe we are the only fund manager in the market specifically targeting value-add multi-tenant industrial properties in this geography. As such, we are excited at the opportunity to assemble within the fund an optimal portfolio of assets precisely fitting our investment criteria, starting with these three.”

Stay tuned to GlobeSt.com for an upcoming interview with Brian Malliet on value-add industrial and how to evaluate properties for purchase.