BKM Recapitalizes Las Vegas Industrial Center for $154M

January 24, 2025

Industrial Finance Las Vegas News More West

The company partnered with StepStone Real Estate on the transaction.

One of the Pacific Business Park’s buildings, located at 1065 American Pacific Drive. Photo courtesy of BKM Capital Partners

BKM Capital Partners has expanded an existing partnership with StepStone Real Estate, the real estate arm of StepStone Group, for the $154 million recapitalization of Pacific Business Center, a 10-building 748,813-square-foot industrial project in the Las Vegas market.

Constructed between 1996 and 1998, Pacific Business Center is comprised of 1045-1175 American Pacific Drive, 160-194 Gallagher Crest Road and 1060-1110 Mary Crest Road in Henderson, Nev. The Class A development is 90 percent occupied with a diverse mix of high-quality tenants. In-place rents are projected to be 30 percent below market rate, giving BKM an opportunity for immediate value creation. The industrial center is in a designated Foreign-Trade Zone.

BKM, a Newport Beach, Calif.,-based real estate fund manager and operator that focuses exclusively on multi-tenant industrial assets in the Western United States, acquired the industrial center’s properties from Northwestern Mutual Real Estate as a portfolio transaction in July 2019 for $113 million. At that time, it was the firm’s largest deal.

The institutional-grade assets have had more than $12.4 million in capital improvements since 2010. Projects included installing high-quality HVAC and EVAP systems and LED lighting, as well as upgrading office finishes and painting building exteriors. Other features include 24- to 28-foot clear heights, ESFR sprinkler systems and new TPO roofs. BKM has since made other improvements to the facilities, including cosmetic renovations in 2017, according to CommercialEdge. Several of the buildings have two-level office build-out components, CommercialEdge reported.

Partnering with StepStone

In August 2023, BKM formed a partnership with StepStone Real Estate for a GP-led secondary direct transaction that included ownership in Pacific Business Center. SRE acquired interests in two assets, including Backlot Burbank, a light industrial property in Burbank, Calif., leased to entertainment companies. As part of that partnership agreement, SRE would invest in other small- and mid-bay industrial properties across Western U.S. markets.

The recapitalization of Pacific Business Center increases SRE’s ownership in an asset and market that both firms view favorably. BKM notes Las Vegas’s dynamic industrial market fundamentals combined with the asset’s rent growth potential and stable cash flow provide a strong foundation for success.

The Las Vegas industrial market is a versatile market that caters to both big-box tenants and smaller occupiers, with strong demand for spaces under 50,000 square feet, according to Cushman & Wakefield. The market has seen steady leasing activity, but an influx of new supply may give tenants greater leverage in lease negotiations, the firm stated in its third-quarter 2024 report for the Las Vegas industrial market. However, rising vacancy rates – the overall vacancy rate was 8.8 percent, up 180 basis points quarter over quarter in Q3 – may delay new development, which could help balance supply and stabilize vacancy levels, according to Cushman & Wakefield.

BKM’s other activities

The recapitalization of Pacific Business Center represents another milestone for BKM, which has invested more than $4.5 billion in more than 120 small and mid-bay light industrial properties since 2013. The firm has a value-add strategy and targets under-managed and under-capitalized assets. Over the past two years, BKM has acquired high-quality assets at pricing well below replacement cost. It has also undertaken several other recapitalizations.

In December, BKM partnered with Kayne Anderson Real Estate for a $550 million recapitalization of a nine-property light industrial portfolio totaling more than 2.1 million square feet in several urban markets. The largest of the properties is Hughes Airport Center, a 672,424-square-foot asset in Las Vegas. The rest of the portfolio is located in California, Arizona, Colorado and Washington state.

That same month, BKM recapitalized three San Diego business parks from its BKM Industrial Value Fund II LP, with Tokyu Land US Corp. for $76.9 million.

More recently, BKM acquired West Belt Business Park, a five-building industrial park totaling 260,887 square feet for $34.1 million in Houston’s Westchase submarket. Longpoint Realty Partners sold the property, according to CommercialEdge data.