BKM Capital Partners is adding to its light industrial portfolio. The real estate manager has acquired two portfolios in Texas for $90 million — one in Dallas-Fort Worth (DFW) and Houston, as it sees value in the Lone Star State's business-friendly environment and favorable industrial fundamentals.
In total, the deal includes five properties, spanning a total of 750,000 square feet. The Houston acquisition ($29.5 million and 242,555 square feet) was made in partnership with BMA Capital Corp., while the DFW deal ($60.3 million and 512,000 square feet) was struck through a joint venture with Whittier Trust.
Currently, the average occupancy for the Houston portfolio is 70 percent, while the DFW assets fare better at an 81 percent rate. Another thing that made the properties attractive for BKM was the ability to acquire them at "a significant discount to replacement cost." Plus, the company called the Texas market as a whole a "powerhouse."
“These weren’t just opportunistic buys, but strategic,” said Brett Turner, senior managing director of acquisitions & dispositions, said in a statement.
“We’ve been tracking these markets closely. While the broader development pipeline in Texas remains active, new construction at the sub-100,000-square-foot scale is nearly nonexistent. That gives us a unique opportunity to meet growing tenant demand with repositioned, institutional-quality product that simply doesn’t exist elsewhere.”
Turner added that BKM has been "underwriting significant NOI growth" just in the first 16 months for the portfolios, based on the leasing market-ready space available at the current costs.
The Houston portfolio, purchased from Fort Capital, includes two properties: Southwest Business Park and Stonecrest Business Center. The latter features five buildings and 17 units; South Business has 22 units across three buildings.
The bulk of the DFW accounts for Market Street Distribution Center, which spans 435,479 square feet. The other acquired assets in the area include 34,325-square-foot Northgate 22 and an unnamed 42,506-square-foot site at 501 106th St.
Additionally, BKM has more in store for the bought properties. For one, it plans to deploy $10.4 million to renovate the assets, which include roof and HVAC upgrades, new signage, revamped parking lots and drought-tolerant landscaping. On the other hand, the company intends to repurpose three suites in Houston into seven smaller units and another five in the portfolio into 11 units.
BKM, which focuses on small and mid bay light industrial business parks, has acquired 150 properties since its 2013 founding, as of June, according to the company. It also manages more than 4,500 tenants. With the latest acquisition, BKM's small bay holdings now exceed a million square feet in both Houston and DFW.
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