On Waiting Before Seeking Institutional Capital

Malliet: “We put a lot of work into researching and getting to know the institutional landscape and realized early on that institutional investors value proven results above all else.”

IRVINE, CA— BKM Capital Partners took a unique approach with its first-time fund, the BKM Industrial Value Fund I, L.P. , which recently closed at $105 million , by investing its own capital to build out a real organization before pursuing institutional capital, Brian Malliet tells GlobeSt.com. We spoke exclusively with Malliet about this approach, why it works and whether it’s the start of a trend among start-ups. GlobeSt.com: Why did you choose this approach? Malliet: We knew that raising institutional capital as a first time fund would not be an easy feat and that our strategy had to be unique. We put a lot of work into researching and getting to know the institutional landscape and realized early on that institutional investors value proven results above all else. It was this insight that drove our strategy. We began by drawing upon the deep relationships we had established throughout our careers to first raise a friends-and-family round and begin executing on our business plan. This approach allowed us to seed the fund and attract potential institutional investors by demonstrating an already-proven model. Our strategy proved to be a competitive advantage when compared to other first time funds. The fact is, the majority of first-time funds in today’s market never get funded. Based on our approach, we were successful in securing a total of $105 million in institutional capital for our first fund. This gives us $300 million in buying power to acquire value-add assets and deliver strong returns to our investors. GlobeSt.com: What is the focus of this fund? Malliet: Our strategy is to focus on niche multi-tenant industrial parks, specifically within the Western US. This strategy is at the core of who we are as a firm. Our entire execution team, myself included, has extensive knowledge within this product type and geography. By focusing on this niche market, we are able to further demonstrate to institutional investors that we can acquire and generate value on their behalf. Our niche focus also provides us with a deeper understanding of the market, and allows us to create an opportunity for scale. GlobeSt.com: How did your approach play out? Malliet: The ability to have well-performing seed assets provided our investors with confidence that we were further along in the process than a traditional first-time fund manager. This allowed us to take our fund to the next level, successfully attracting large institutional capital to further grow our existing investor base. In addition, we recruited a management team with deep roots in both the industrial product type and the institutional real estate fund business, which helped to further drive investor confidence. As a result of this investor confidence, our debut fund raised a significant amount of institutional capital and is now in a position to continue to target assets that will create tremendous value for our investors. We are actively seeking to acquire value-add multi-tenant industrial assets throughout the Western US, with a focus on markets in Washington, Oregon, California, Nevada and Arizona. GlobeSt.com: Do you believe this type of approach will become a trend among start-ups? Malliet: This approach provides a significant opportunity to attract institutional investors, but it also requires a great deal of patience and deep financial resources. For that reason, most fund managers will not be in a position to execute this approach. We were fortunate to have developed the connections and expertise needed to build our company up from the start and to make this approach work. We don’t anticipate that our strategy will become widespread among fund managers, but we do believe that any fund manager with the resources and connections to launch their fund in this way will benefit greatly.