BKM JV Buys Light Industrial Portfolio for $168M

A joint venture of BKM Capital Partners and Kayne Anderson Real Estate, the real estate arm of Kanye Anderson, acquired an 889,352-square-foot, eight-property small-bay light industrial portfolio in metro Phoenix for $167.9 million from an affiliate of Equus Capital Partners Ltd. The portfolio has 364 units in 41 buildings that are nearly 90 percent occupied by a diverse group of tenants.

The properties are in the Airport and Tempe submarkets and bring BKM’s total assets under management to more than $3 billion as the institutional fund manager expands its national footprint of multi-tenant, light industrial assets.

The transaction also increases BKM’s Arizona portfolio to about 4.5 million square feet across 27 properties. In March, BKM acquired a 779,000-square-foot light industrial portfolio in Phoenix from Starwood Capital Group for $156.8 million. The properties were located at Kyrene CommercePlex, Estrella Business Park II and Hohokam Industrial Park.

The new acquisition is the sixth investment made through the BKM-Kayne Anderson $1.5 billion joint venture since it launched in May. The partnership targets value-add light industrial real estate opportunities in middle-market areas.

Portfolio overview

Two of the properties are in the Airport submarket. Elwood Industrial Center has four buildings across 133,076 square feet. Roeser Commerce Center has two buildings with a total of 59,620 square feet.

The remainder of the portfolio spans 35 buildings across the Tempe area. They are:

• Buttes Business Center, 13 buildings, 188,282 square feet;
• Tempe Commerce Center, eight buildings, 177,354 square feet;
• Priest-Excel Business Park, five buildings, 155,094 square feet;
• Expressway Corporate Center, six buildings, 79,333 square feet;
• Mineral Road, two buildings, 68,693 square feet;
• Harl Industrial Park, one building, 27,900 square feet.

The assets were primarily built in the 1970s and 1980s and feature 14- to 20-foot clear ceiling heights and average unit sizes of 2,400 square feet. They have a weighted average lease time of approximately two years, presenting the investors with a 22 percent mark-to-market opportunity on rents.

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BKM is planning value-add projects including making physical upgrades, strategic reconfigurations and operational efficiencies. Select larger units will be transformed into smaller, high-demand configurations to meet tenant needs. The firm also plans to invest in capital improvements including roof replacements, HVAC upgrades and aesthetic enhancements. BKM will provide onsite property management to improve service delivery and drive tenant retention as rents are marked to market.

Brett Turner, BKM’s senior managing director of acquisitions and dispositions, with support from Michael Grossner, director of acquisitions and dispositions, led BKM’s in-house acquisitions team. The seller was represented by CBRE National Partners’ Executive Vice Presidents Rusty Kennedy and Joe Cesta, as well as Darla Longo, vice chair & managing director.

Opportunities found in fundamentals

The transaction was completed at a significant discount to replacement costs. Brian Malliet, founder, CEO & CIO of Newport Beach, Calif.,-based BKM, said in prepared remarks the acquisition provided a rare opportunity to acquire a diverse collection of infill assets across the Tempe and Phoenix region. He noted the need for functional, small-bay space is growing in Phoenix as the market transforms into a high-tech manufacturing and logistics hub. Malliet stated the portfolio provides both critical mass and operational flexibility for BKM in one of the nation’s top industrial markets.

Leasing has surged in the Phoenix industrial market, with net absorption increasing 50 percent year-over-year to 6.8 million square feet in the first half of 2025. The leasing activity is occurring at the same time new construction is slowing. BKM reports second quarter deliveries were the lowest since 2021. The market has about 11.2 million square feet underway at midyear, a 60 percent drop from last year.

Most of that pipeline is larger big-box buildings so small-bay assets are experiencing increased demand and higher rents. BKM notes small-bay vacancy across the metro is 4.1 percent and as low as 1.1 percent in submarkets like the Airport area. By comparison, big-box vacancy is 16 percent.

More recent JV deals

In July, the BKM-Kayne Anderson joint venture acquired a three-asset industrial portfolio comprising 505,000 square feet across 16 buildings in the San Francisco Bay Area. Link Logistics sold the assets for more than $120 million, according to the San Francisco Business Times.

The shallow-bay industrial portfolio features two campuses in Hayward, Calif.—the 176,056-square-foot Huntwood Business Center and the 82,562-square-foot Hesperian Business Park. It also included Concord Industrial Park, a 245,930-square-foot property in Concord, Calif. The properties were built between 1980 and 1988, and the portfolio was 89 percent leased.

A month earlier, the joint venture purchased a five-property portfolio in Orlando, Fla., with 489,891 square feet in 45 suites across nine buildings. The transaction in the 33rd Street/McLeod industrial submarket was one of the largest light industrial deals in metro Orlando in recent years. BKM rebranded the portfolio under the name Gridline Orlando. The properties were constructed between 1980 and 1986 and have an overall occupancy rate of 98 percent.