BKM Recaps Light Industrial Portfolio for $550M
BKM Capital Partners, a fund manager specializing in value-add light industrial properties, has undertaken a $550 million recapitalization of a nine-property portfolio with Kayne Anderson Real Estate. The light industrial facilities total more than 2.1 million square feet in urban markets in the western United States.
The largest of the properties is Hughes Airport Center, a 672,424-square-foot asset in Las Vegas. The rest of the portfolio, including four buildings in California, and others in Arizona, Colorado, and Washington state, measure between about 141,000 square feet and 256,000 square feet.
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The portfolio’s varied tenant base and shorter lease terms mean that BKM and Kayne Anderson will enjoy a favorable rent rollover profile at the properties, and thus are poised to capitalize on the high annual rent growth seen in the small-bay industrial sector, according to BKM.
The deal represents Kayne Anderson’s first entry into the light industrial sector. The Boca Raton, Fla.-based alternative asset manager otherwise specializes in senior housing, student housing, medical office, multifamily housing and self-storage.
Newport Beach, Calif.-based BKM has long been bullish on light industrial, which it defines as industrial properties smaller than 200,000 square feet, with spaces of less than 50,000 square feet. Also this month, the company recapitalized a smaller portfolio of three San Diego business parks from its BKM Industrial Value Fund II LP, with Tokyu Land US Corp., for $76.9 million.
Light industrial still robust
While the pandemic-related retail surge may have subsided, small-bay industrial properties are thriving thanks to several enduring structural trends that continue to drive demand, BKM Senior Managing Director, Acquisitions & Dispositions Brett Turner told Commercial Property Executive.
“The continued growth of e-commerce has made last-mile logistics, particularly in infill areas of population centers, indispensable to meet consumer expectations for same-day and next-day delivery,” Turner commented.
Retail isn’t the only driver, however. Reshoring of manufacturing, which is supported by federal incentives and geopolitical shifts, has increased the need for flexible spaces that can accommodate related ancillary and support services needing light manufacturing, assembly, and R&D, he added. Multi-tenant small-bay industrial, with its adaptability and tenant diversity, serves an array of industries, including logistics and construction, but also technology and life sciences.
“With limited new supply and high barriers to entry in the most sought-after markets, these assets are positioned to capture rent growth and occupancy regardless of market conditions. They are resilient even during economic fluctuations.”
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