Value-Add Case Study: West Valley Business Park

BKM Capital Partners

2 minutes ago

Get an exclusive look into BKM's impressive property transformation at this 205K SF asset in Kent, WA.

Photo of building 6624 at West Valley Business Park.

PROPERTY OVERVIEW

Located less than five miles from Seattle-Tacoma International Airport and 16 miles from downtown Seattle, the 205,655-square-foot property featured 19 buildings and 180 units at acquisition.
Originally built with a 74% office buildout, the asset presented a prime opportunity to reduce the office configuration by nearly half, enhancing flexibility for the diverse local tenant base.

Basic information about the property, including property features and sale statistics.

OPPORTUNITY

Aesthetic Vision:

The property originally lacked a modern design concept, allowing BKM to enhance its visibility and appeal.
Cosmetic upgrades included a new paint scheme, updated property signage, and extensive landscape work.
Dysfunctional office units and overbuilt industrial warehouses would be converted into smaller, versatile suite spaces.

Financial Vision:

Acquired at a 45% discount to replacement cost with stable in-place cash flow.
Average WALT of 1.9 years, with an opportunity to mark-to-market over 80% of NRA.
12% below-market in-place rents, offering strong rent growth potential.
Average unit size of only 1,150 SF, naturally limiting exposure to large tenants.

NEARBY BKM PROPERTIES

Regional map showing all of BKM's properties in Seattle.

WHY WE LOVED THIS DEAL

Numerous factors lead BKM to pursue the deal, including attractive repositioning opportunities and a strategic location.

Embedded demand: The property was acquired at 88% occupancy, proving an underlying demand for the product type despite the lack of cosmetic enhancement and functional upgrades.
Local competition: The park was deemed to be a competitor to BKM’s nearby asset Seattle Exchange, eliminating any direct competition and enhancing BKM’s local market presence.
Tenant Base: The initial rent roll was extremely diverse, with no tenant accounting for over 16% of net rentable area.
Location: The park has excellent visibility off of SR-181, a key arterial highway that connects the Kent Valley to other major Seattle submarkets.

MARKET DYNAMICS

The broader Seattle industrial market has 4.04M residents, 364M SF of industrial space, and 5.8M SF of space under construction.
Current vacancy of 8%, with market rents at $14.44/SF despite -1.8M SF net absorption in the past year. Rates continue to rise steadily, having grown 86% over the past decade.
The Kent submarket faces no new construction as of Q1 2025, creating supply constraints that support stabilization. This, coupled with the sustained demand from key economic drivers, positions the Kent Valley for improved absorption and higher occupancy in the future.
Industrial sales remain robust, with an average sale price of $235/SF and $1.5B in total sales in 2024. As the market adjusts to the influx of recent deliveries, we should expect to see continued strength in industrial pricing.

FOCUS ON GROWTH - SIC CODES

The BKM team seeks to continuously diversify its tenant mix, aligning with its growth strategy to mitigate risk and hedge against industry-specific volatility.

Pie chart showing the tenant concentrations at the business park.

EXECUTION PLAN

BKM implemented a $7.7M CapEx plan to achieve stabilized occupancy and meet tenant needs, which included $1.46M for cosmetic upgrades, $2.21M for structural improvements, and $4.05M for additional expenses.
To unlock rent growth, the team aimed to roll under-market leases, targeting 144 leases (81% of NRA) over the hold period.
This approach required a comprehensive value-add plan and active property management presence to enhance marketability and justify rental rate premiums.

Cost breakdowns for both cosmetic and structural improvements.

Exterior Improvements

Interior Improvements

PROPERTY TRANSFORMATION

before and after photos showing the transformation of the property.

RESULTS

BKM’s strategic value-add approach has delivered exceptional operating and leasing outcomes at West Valley Business Park, showcasing the successful execution of its business plan and its proven ability to generate strong returns for investors.

84.7% NOI growth between 3Q 2019 and 3Q 2024.
8% net increase in occupancy since acquisition. Maintained stable occupancy throughout the hold period as a result of a robust leasing strategy.
Executed 123 unit rollovers to-date, which is approximately 80% of NRA.
Raised occupancy from a low of 63% to 90%. The asset stabilization process followed a phased, methodical approach, allowing for a seamless transition as the large number of unit conversions were successfully completed.
17% average mark-to-market increase on lease expirations.
78% of all transactions were signed at or above MLA.
Average lease rate at the property is 4.4% above MLA.
87% increase in overall lease rates at the property, with average in-place rents of $1.12/SF in 2019 and $2.10/SF in 2024.
3-6 months average downtime for warehouse units at the asset, with MLA’s closer to nine months.
158 total leases executed by the BKM team at this project since 2019.