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12/12/24
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BKM Capital Partners has recapitalized three San Diego business parks from its BKM Industrial Value Fund II, LP with Tokyu Land US Corporation for $76.9 mil. The transaction represents the first joint venture between BKM and Tokyu Land US Corporation, a real estate investment and operating company owned by Japan-based Tokyu Fudosan Holdings Group.
Totaling 342k sf, the small-bay facilities are in a well-located corridor of Otay Mesa, one of the region’s most active industrial submarkets. The three properties involved in this recapitalization are:
• Borderpoint Business Park: Located at 6754, 6774, and 6794 Calle de Linea in San Diego, the asset comprises 16 units totaling 173.3k sf across three buildings. The asset features 22- to 24-foot-clear ceiling heights, 104 dock-high loading doors, and 14 grade-level loading doors.
• Otay Crossing Business Park: Features three units within two buildings at 2340 Enrico Fermi Dr and 10025 Siempre Viva Rd. The 64.8k sf asset offers 24-foot warehouse clearance, 27 dock-high loading doors, and three grade-level loading doors.
• Otay Distribution Center: Consists of eight units totaling 103.9k sf in two buildings at 6987 and 6995 Calle de Linea. The park offers 24-foot-clear ceilings, 63 dock-high loading doors, and one grade-level loading door.
“Through strategic investments in functionality, targeted improvements, and leasing strategies, we unlocked the full potential of these assets, making them as sought after by institutional investors as they are by the tenants that occupy them,” observed Brett Turner, Senior Managing Director, Acquisitions & Dispositions at BKM Capital Partners. “Our repositioning efforts transformed the Otay Mesa Industrial Portfolio into a highly functional and desirable product.”
Since acquiring the properties five years ago, BKM has invested more than $1.4 mil in deferred maintenance, cosmetic improvements, and speculative tenant improvements to meet its brand standards. The firm also reconfigured several suites into more functional layouts, reduced office space to less than 15% of total area, and invested in rollover tenant improvements to align with the BKM brand standards. These efforts, combined with operational efficiencies, resulted in an 86% increase in the portfolio’s weighted average in-place rental rate.
The three parks are now leased to 21 tenants with 2.2 years of WALT and rents approximately 17% below current market rates. BKM, which will serve as the joint venture’s domestic operating partner, is leveraging upcoming expirations to complete improvements and capture market rental rates in the first quarter of 2025.
The assets are the last remaining components of the Otay Mesa Industrial Portfolio, a six-park package that BKM acquired for $71.6 mil from Stockbridge Capital Group in 2018. The firm sold two assets, San Diego International Center and Frontera Business Center, soon after closing, and disposed of Faraday Industrial Park this summer, earning an aggregate $51 mil.
“Otay Mesa is one of the most dynamic industrial markets in the Western U.S., and our ability to reposition these properties underscores the strength of our value creation strategy,” said Brian Malliet, BKM’s Founder, Chief Executive Officer, and Chief Investment Officer.
“The region’s expanding cross-border trade, nearshoring opportunities, and dynamic tenant base have made it one of the most resilient industrial submarkets in the Western U.S.” said Brian Malliet, BKM’s Founder, Chief Executive Officer, and Chief Investment Officer. “We remain confident in our ability to capitalize on market tailwinds and deliver compelling results to our investors while setting these properties up for long-term success.”
Otay Mesa’s strategic location along the U.S.-Mexico border positions it as a critical hub for cross-border trade, nearshoring, and warehouse distribution. With over 12 million people living within 100 miles and substantial maquiladora activity in Tijuana, the region continues to attract industrial investors and occupiers. Enhancements to its Ports of Entry, including the upcoming Otay Mesa East POE, are expected to further stimulate economic activity and solidify the area as a powerhouse for logistics and manufacturing. As industrial fundamentals remain strong, Otay Mesa is poised for sustained growth, benefiting from its unique blend of location, workforce, and infrastructure advantages.
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