The brain trust of Newport Beach’s Master Development Corp. is gearing up to spend Australian money on West Coast industrial space.
Master Development this month teamed up with Australia’s Dexus Property Group, a real estate investment trust valued at close to $11 billion that’s targeted the West Coast as its next growth area.
Under the deal, Master Development and its eight-person staff essentially become the U.S. management office of Dexus, which had been operating out of Chicago.
The Newport Beach office will bring on two Dexus officials and will be led locally by Jane Lloyd, Dexus’ managing director of U.S. investments.
Master Development’s found-ers and managing directors, Bruce McDonald and Bryan Bentrott, will be tasked with finding acquisitions and development projects, largely in the industrial markets of Seattle, the Bay Area and Southern California.
“We’ll become their ears and eyes” for West Coast deals, Bentrott said.
Right now, Dexus has set aside $100 million for the Newport Beach office to invest in the next year. After the company sells off some real estate east of the Rocky Mountains, Dexus’ U.S. office could have close to $600 million to spend.
Dexus plans to buy properties and land primarily in cash deals, without the need for debt.
The plan is for the company to be one of the five largest industrial investors on the West Coast once all is said and done, according to Dexus’ Chief Executive Victor Hoog Antink.
Dexus had been working with CB Richard Ellis Group Inc. earlier this year to find potential U.S.-based developers to invest in before deciding to partner with Master Development.
The partnership is a big shift in size and activity for Master Development’s management team, whose last development project finished up construction work in early 2009.
The local developer is best known of late for developing industrial buildings for sale in Corona, as well as a 48-unit industrial condominium project in Santa Ana, formerly known as the Electric Farm site, which still has units for sale.
Aligned for Growth
“I’m ready to play offense,” Bentrott said. “We’ve been playing defense the past few years.”
Operating as a stand-alone developer proved challenging during the past few years, as the down real estate market presented few opportunities for Master Development.
“About a year ago, Bruce and I thought our model was going to need to change. As a medium-sized developer, it’s a tough business model right now,” Bentrott said. “We thought either we would need to shrink, or we’d have to align ourselves with someone bigger.”
Bentrott said he’d never heard of Dexus prior to being introduced to the company about three months ago, even though the real estate investment trust already has a decent-sized local portfolio.
The company currently owns about 25.7 million square feet of industrial space in the U.S. with about half of that in the West. Some 5 million square feet is in the Inland Empire.
Dexus has been operating in the U.S. since 2004. It’s worked with local developers before, including Aliso Viejo’s Parker Properties on a Santa Clarita office building that opened in 2008.
“They’re a bit of a well-kept secret,” Bentrott said.
In Dexus’ home country, it isn’t much of a secret. It’s said to be the largest owner of office buildings in Australia and the third-largest owner of industrial space there.
That prominence in Australia gave the company some buffer to the downturn in the U.S. commercial real estate market.
Under the terms of its deal with Dexus, Master Development will keep its existing real estate holdings separate from the Australian company.
