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BKM Capital Partners Closes $48 Mil Industrial Buy in Arizona

1/10/24

BKM Capital Partners has acquired a pair of multi-tenant industrial parks in the Greater Phoenix area for $48 mil, or $178.80/sf. The properties, Gateway University Park I & II, total 268.4k sf and are situated within the sought-after Airport submarket of Tempe, AZ.

Located at 1605-1635 and 1705-1797 W. University Dr, the assets consist of 16 tilt-up buildings housing 81 units that range in size from 1.7k sf to 22.4k sf. Built in 1982 and 1983, the properties feature two dock-high and 106 ground-level loading doors, 16'-22' clear ceiling heights, and an above-average parking ratio of 3.73 per 1,000 square feet.

“The transaction presented an opportunity to acquire one of the submarket’s premier light industrial parks at a 50% discount to replacement cost,” stated Brett Turner, Senior Managing Director of Acquisitions and Dispositions at BKM. “We look forward to leveraging our planned value-add improvements and in-depth knowledge of the area to capture the asset’s full potential.”

As part of its value-add strategy, BKM intends to implement a $2.4 mil high-image capital improvement plan to improve the asset’s efficiency and bring it up to brand standards. Plans call for upgrades to roofs, parking lots, landscaping, HVAC systems, and updates to the signage and paint scheme.

BKM plans to leverage the property’s weighted average lease term of 2.7 years to bring rents at Gateway, which is 99% leased to 77 tenants, up to market rates over the course of its hold period. Current in-place rents are 36% lower than market rents. The company also intends to reduce the share of office space on site from 54% to about 35% of net rentable area.

“The acquisition of Gateway University Park, one of the largest single-asset concentrations of multi-tenant industrial space in the submarket, brings our Phoenix-area holdings to 2.7 msf of light industrial space across 15 properties,” said Brian Malliet, BKM’s Chief Executive Officer. “Nearly 1 msf of that is clustered within a five-mile radius of Gateway. We believe that the property’s highly visible location, combined with our proven value enhancement strategy and diverse range of suite sizes, will attract the Phoenix metro’s most discerning tenants.”

Gateway Industrial Park I & II are located adjacent to key logistics hubs including Phoenix Sky Harbor International Airport and I-43/I-60/I-10/Loop 202, providing true last-mile capability and allowing for immediate access to the fastest growing population centers in the country. In particular, BKM hopes to take advantage of the Phoenix market’s blossoming semiconductor industry—evidenced by major recent commitments by such flagship groups as Intel, TSMC, NXP Semiconductor and ON Semiconductor that have generated enormous trickle-down benefits to the industry’s supporting cast of light industrial tenancy. Phoenix industrial rents have grown by 59% between 2020 and 2022 according to Green Street Advisors.

BKM was represented in the deal by Cushman & Wakefield’s Will Strong, James Carpenter, Kirk Kuller, Robert Buckley, Tracey Cartledge, Michael Matchett, and Molly Hunt. Stockbridge Capital Group is the seller.




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