News Summary
BKM Capital Partners has formed a $1.5 billion joint venture with Kayne Anderson Real Estate to invest in small- and mid-bay industrial properties. The partnership aims to capitalize on the growing demand in the light industrial sector, especially by acquiring and repositioning underperforming assets. The venture plans to double BKM’s assets under management to $5 billion in the next 18 to 24 months. Recent acquisitions include significant portfolios on the West Coast and in Orlando, Florida, highlighting their strategic focus on enhancing value in this overlooked market segment.
Newport Beach, California – BKM Capital Partners, a real estate investment firm, has announced a significant collaboration with Kayne Anderson Real Estate, resulting in the formation of a joint venture worth $1.5 billion. This venture aims to target small- and mid-bay industrial properties, a segment recognized for its robust performance yet often overlooked by traditional institutional investors.
Both firms have emphasized the potential of light industrial real estate, noting a growing demand for these properties. The joint venture intends to enhance value through the acquisition and repositioning of underperforming industrial spaces, specifically those with below-market rents, high vacancy rates, or operational inefficiencies.
BKM Capital Partners plans to leverage this partnership to achieve its goal of doubling its assets under management to $5 billion within the next 18 to 24 months. The joint venture has already made strides by completing several transactions, including:
- A nine-property, $550 million recapitalization covering a 2.1-million-square-foot portfolio on the West Coast.
- A five-property deal encompassing 1.2 million square feet located in Las Vegas and Phoenix.
The $550 million deal was finalized in December, marking Kayne Anderson’s inaugural entrance into the light industrial sector. Before this joint venture, Kayne Anderson specialized in alternative real estate sectors such as self-storage and residential properties for seniors, students, and military families.
In June, the collaboration made headlines with the acquisition of a large five-property portfolio in Orlando, Florida, totaling 489,891 square feet. BKM described this deal as one of the largest transactions involving light industrial properties in the Orlando metropolitan area in recent years.
Furthermore, BKM Capital Partners recently acquired a highly sought-after industrial park in Fremont, California, for $43 million, expanding its extensive portfolio across various California locations, including Sacramento, San Diego, and North Hollywood.
Analysts suggest that the joint venture’s strategy of targeting older, infill properties aligns well with current market trends. Nationally, logistics spaces are witnessing increasing vacancy rates, with approximately 30 million square feet returned to the market and a vacancy rate of 6.9% reported. The operational complexities of managing smaller tenants and fragmented portfolios can make this sector challenging for many institutional investors, which further emphasizes the potential for the joint venture’s focus.
The demand for small-bay properties continues to thrive, largely due to their appeal to local service providers, contractors, and light manufacturers. The rise in population within secondary markets has stimulated the demand from industries related to housing, thus creating a fertile ground for investment in small-bay industrial spaces. This increased demand has attracted the attention of other competitors seeking similar opportunities, driven by the favorable market fundamentals and perceived lack of entitlement risk.
As the joint venture unfolds, Kayne Anderson has simultaneously announced a separate $2.25 billion capital commitment towards an energy fund, targeting investments in the oil and natural gas sectors. Established in 1984, Kayne Anderson currently manages approximately $38 billion in assets, whereas BKM Capital Partners emerged in 2013, completing transactions worth $4.5 billion across more than 120 properties.
This strategic partnership between BKM Capital Partners and Kayne Anderson Real Estate represents a significant move within the industrial real estate sector, aiming to capitalize on the opportunities in small- and mid-bay properties while enhancing their respective portfolios.
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Additional Resources
- Orange County Business Journal: BKM Capital Starts $1.5B JV with Kayne Anderson
- Wikipedia: Real Estate Investment
- PEI Media: BKM Capital Partners: The Rise of Small-Bay Industrial
- Google Search: Light Industrial Real Estate
- IREI: BKM Capital Partners & Kayne Anderson Acquire Multi-Tenant Light Industrial Portfolio in Orlando
- Google Scholar: Small-Bay Industrial Properties
- CoStar: Joint Venture Brings Big Capital to Small Bay Warehouses Across US
- Encyclopedia Britannica: Industrial Real Estate
- Commercial Observer: BKM & Kayne Anderson Industrial JV
- Google News: Industrial Real Estate Investments
