Newport Beach, California–based BKM Capital Partners, an institutional fund manager with a niche focus on value-add, multi-tenant, light industrial investments, has closed its second institutional fund, BKM Industrial Value Fund II L.P., for the first time, with $135 million in equity commitments as well as $25 million in co-investments. The firm also currently has an additional $100 million of soft-circled equity commitments from European and U.S. institutional investors.
The fund comprises a mix of institutional investors including a U.S. college endowment, U.S. state pension fund, a large U.S. insurance company, a German trust, U.S. fund of funds, and a Canadian family office, according to Nima Taghavi, chairman of the board and co-founder of BKM Capital Partners.
“Our first institutional fund, which closed in 2016 and is fully invested, has the same strategy as this second fund of acquiring value-add multi-tenant industrial assets throughout major metro markets in the Western U.S.,” Taghavi says. “Fund I had a target net IRR of 15 percent but is performing at a 19 percent net fund IRR. Additionally, we recently sold the first three assets in our Fund I, achieving gross IRRs on all three above 37 percent and multiples that ranged from 2.0 to 2.5.”
BKM’s co-founder and CEO Brian Malliet says the success demonstrated by these returns is a testament to BKM’s niche strategy, execution platform, and the growing understanding and demand for light multi-tenant industrial properties across the U.S. “We have an extremely strong pipeline of value-add investment opportunities, and this $160 million closing allows us to immediately begin deploying capital. By being strategic in our specific focus and operator execution platform, we will capitalize on the growing demand for properties that serve as ‘last mile’ delivery hubs for retailers and industrial users. This will maximize returns to our investors while we continue to fundraise over the course of the year.”
Fund II will invest exclusively in the acquisition, improvement, and repositioning of distressed and undervalued light multi-tenant industrial assets in strong growth markets across the Western U.S. BKM has already acquired four assets for the Fund. These properties include Hughes Airport Center II in Las Vegas, Activity Business Center in San Diego, Inverness Business Park in Denver, and Expo Centre in Sacramento, with two additional assets in escrow.
“Our specialized on-site operating platform expertise and niche product type are key differentiators,” Malliet says. “Multi-tenant industrial is our bread and butter. We are unmatched in this sector, with multiple new software technologies implemented to efficiently manage, track and execute. While much of the big-box industrial sector has surpassed peak prices, we remain able to identify and acquire assets well below replacement cost, create value, and deliver strong risk-adjusted returns to investors.”
BKM Capital Partners currently has more than 27 properties under management, totaling more than 4.9 million square feet and $626 million AUM. Fund II is on track to reach its target of $300 million by final close, planned for Summer 2018.