NEWPORT BEACH, CA-Australian REIT Dexus took a big step Wednesday in a plan to invest at least $600 million in industrial properties in three West Coast port markets, primarily in the Greater Los Angeles area, when the Sydney-based company opened an office here and staffed it with a team to execute its West Coast strategy. 

Dexus CEO Victor Hoog Antink tells GlobeSt.com that the strategy involves selling the company's East Coast and Central US holdings over the next few years in order to concentrate its portfolio on the West Coast. That plan is intended to replicate the company's Australian strategy of investing in a very few markets but with a high concentration of holdings in those markets, which has worked very well for the REIT in Australia, Hoog Antink explains.

Heading the Newport Beach office is Jane Lloyd, managing director of US investments. Dexus has hired Bruce McDonald and Bryan Bentrott, both formerly of Master Development Corp., as managing director of development & asset management and managing director of acquisitions & leasing, respectively, along with a team of six former Master Development executives with expertise in property management, finance and operations.

Dexus owns 25.7 million square feet of industrial and logistics space in 98 US and Canadian properties, 97 of them in the US. The properties are in 17 different geographic submarkets.

Hoog Antink tells GlobeSt.com that although the Dexus strategy involves selling its Eastern and Central US assets, it will not need to wait to sell them before buying on the West Coast. "We will actually allocate capital to the West Coast so that if they (the Newport Beach-based team) want to buy ahead of sales, they can do that," the Dexus CEO says. He points out that the company has "plenty of financial capability and flexibility," with more than $1 billion available in credit lines today and low leverage―under 30%. In addition to acquisitions, its West Coast investments could also include build-to-suit projects, he notes. Regarding the dispositions of properties in the eastern and central markets, he adds, "We're not in a hurry. We will take our time."

Dexus will concentrate its investments in the Greater Los Angeles area, the Oakland area and Seattle-Tacoma because of the huge volume of trade that comes through the ports in those markets, according to Hoog Antink. The company will be among the top five industrial investors on the West Coast once it executes its strategy, he says.

Hoog Antink explains that the Dexus strategy of concentrating its holdings into key markets provides three primary benefits for the REIT: One, it helps the company to establish stronger and longer-term relationships with tenants because the high concentration of ownership enables it to offer tenants a broad range of options for increasing or decreasing occupancy or choosing a build-to-suit. Two, it generates business from a host of sources such as accountants, lawyers, investment bankers and real estate agents because Dexus has such a large presence in the market. Three, it attracts high-quality staff that in turn help to generate opportunities for the REIT.

The Dexus US strategy also will involve transferring the management of its West Coast properties―and a group of Whirlpool facilities―in-house from the third-party managers it now employs. Properties east of the Rockies will stay with their current managers until they are sold. According to Paul Say, head of corporate development and international, the company plans to bring the Whirlpool properties management in-house by July 1 and the balance of the West Coast properties by Jan. 1, 2011. Rreef will continue to provide asset management services for the balance of the Dexus US portfolio, and CB Richad Ellis will continue to provide property management services.

Dexus thinks that now is a good time to buy, Hoog Antink says. He says that the company believes the market is at bottom and that occupancies and rental rates will increase as the US economy recovers. "Traditionally the US is so resilient that the recovery usually happens sooner and with more velocity than people in the rest of the world expect," he says. Dexus, however, is "not trying to play the cycles," Hoog Antink points out. "We think it's a good time to buy, but we are here for the long term," he says.