By Jon Peterson
Irvine-based BKM Capital Partners is looking at finding its first industrial acquisitions for assets in both the San Francisco Bay Area and Seattle for its initial industrial fund, BKM Industrial Value Fund I.
“Our plan is to buy assets in both of those markets in the future. For the San Francisco area, this is a gateway region and for industrial properties does have a very strong transportation network in place that would allow goods to be moved around. For Seattle, we see this region as one that has a strong port and the growth of technology firms that creates a need for industrial product. I think that these two markets also have very favorable current ratios of demand versus supply,” says Paul Dolinoy, on the board of advisors for BKM.
“For Seattle, we see this region as one that has a strong port and the growth of technology firms that creates a need for industrial product.”
The investment company has been looking at some potential deals in both markets but has not closed on any at this point. The capital source for all of its deals is the BKM Industrial Value Fund I. There were a total of $105 million of equity raised for this fund. This was split up with $80 million coming from pension funds and other institutional investors and $25 million raised from a small pool of high net-worth investors.
The investment strategy for the fund is to buy value-add industrial properties. So far it has acquired $150 million worth of properties in markets like Las Vegas, Phoenix and Portland. The overall focus of the fund is to buy properties in Washington, Oregon and California.
The total capitalization of the fund is $300 million. This is achieved by placing leverage on the fund up to 65 percent. The fund seeks to acquire warehouse/distribution industrial properties that range in size from 75,000 to 250,000 square feet. Most of its properties are typically occupied by anywhere from 20 to 75 tenants.
BKM only invests in existing assets. A typical deal size is from $7.5 million to $20 million. The company tries to buy properties where it can achieve a 14 percent to 15 percent net IRR. The investor envisions a four- to five-year holding period from the time it buys the asset to bringing it to market for a sale. The company runs its business on the operating model, with it doing all of the work on the properties itself with no outside assistance.
BKM is planning to market a new commingled fund to investors this year. “We figure that we should have 75 percent of the capital for Fund I invested by this summer. We are planning to launch a second fund later this year. I would think that the targeted equity raise would be $200 million,” said Dolinoy.
