Investors Show Insatiable Appetite for Quality Industrial

Tempe Commerce Park has sold to BKM Capital Partners.

TEMPE, AZ—With job growth continuing to show year-over-year gains, the Phoenix area is experiencing tremendous industrial activity. As an example of that voracious momentum, Tempe Commerce Park has sold to BKM Capital Partners . BKM purchased the five-building park which totals 539,979 square feet of rentable area in a limited marketing transaction for $58 million. The property was purchased from Invesco , on behalf of its client, Ohio Police and Fire . JLL managing director Bo Mills tells GlobeSt.com: “The sale of Tempe Commerce Center continues to show the insatiable appetite of investors for quality industrial product. Phoenix continues to recover and is a preferred market for institutional investors.” This acquisition, which is BKM Capital Partners’ tenth acquisition in the Phoenix metro area this year, was acquired through BKM Industrial Value Fund I LP, according to Brian Malliet , CEO and co-founder of BKM Capital Partners. “The Tempe submarket continues to demonstrate strong economic drivers and is currently one of the most dynamic submarkets in the Phoenix metro,” says Malliet. “Job and housing growth are on the rise, providing a significant opportunity to create value for our investors. This submarket is also experiencing a significant demand for back office users, which is further driving up lease rates in the business parks throughout the region.” Malliet explains that Tempe Commerce Park was acquired at 30% below replacement costs and is currently 100% occupied. This acquisition brings BKM Capital Partners’ holdings in the region to slightly less than million square feet. “The asset was originally brought to market at 85% occupancy, and prior to the acquisition, occupancy was increased to 100%,” says Malliet. “This lease-up will drive distributable cash flow and reduce the cost of debt for the property, increasing overall yields to our investors. Our ability to source and acquire these properties below replacement cost is a key to implementing our strategy of acquiring value-add opportunities, which we can enhance through capital improvements, ultimately driving up property value over time.” According to BKM Capital Partners’ director of acquisitions, Brett Turner , Tempe Commerce Park is located in the heart of Tempe within the “Silicon Desert submarket,” in close proximity to major transit corridors, including the Interstate 10, with in-place rents well-below market value. “The asset’s prime central location and below-market rents will provide a tremendous opportunity for long-term growth,” says Turner. “As the current tenant leases roll, we will be able to attract high quality tenants who are willing to pay a premium for the property’s desirable location and the updated amenities that BKM is planning.” Tempe Commerce Park offers a premium location next to the Phoenix metro area’s largest thoroughfares–the Interstate 10, 101 and Loop 101 freeway–as well Sky Harbor International Airport. Aside from warehouse space, the five buildings also include a total of 274,724 square feet of office/flex space, all of which is fully air conditioned. Malliet tells GlobeSt.com: “Our overall strategy is to acquire light industrial assets well-below replacement costs in markets that are positioned to perform well over time, which is one of the main reasons we have been extremely active in the Phoenix metro area for the last year. This is our 10th and largest acquisition in the area, and we see a tremendous opportunity for long-term value here. We plan to implement a series of capital improvements to the property, which will create significant value for our investors by driving rent growth and property value over time.” Managing directors Mark Detmer, Dave Seeger and Mills , and executive vice president, Steve Sayre led the JLL team on the deal on behalf of seller, Invesco. “This sale really exemplifies the type of momentum the Phoenix industrial sector is seeing right now,” said Detmer. “Tempe Commerce Park offered the buyers the chance to enter a market that is seeing steady growth–thanks largely to major industrial and technology companies. We anticipate the market to only get stronger as the city expands.”