CEO's Report Continued
Vision, strategy and implementation
The DEXUS Group has two core activities:
- The management of a direct domestic and international property portfolio
- A third party property funds management business
Our strategy is to be the leading owner, manager and developer of high quality office and industrial properties in select locations in Australia and the United States.
We are focused on growing our business by achieving scale and operational excellence through active property management, asset management, portfolio management and development management in select markets to deliver low risk sustainable returns.
At DEXUS, property revenue, mainly derived from rental income, represents 91% of our total revenue for the year ended 30 June 2009. We have limited reliance on development income or third party funds management fees.
Reflecting the relative underlying stability of the portfolio, our revenue composition is only minimally exposed to lease expiries in coming years. We actively manage our tenant profile to ensure diversity of income by tenant and industry, with no single tenant currently contributing more than 3% of our total Group rental income.
Domestically, we are building on our leadership position in office — where we are the largest owner/manager of office properties in Australia; and industrial — where we are one of the top three providers of premium industrial facilities.
Internationally, our strategy is to focus on fewer, select markets where we can achieve scale and implement our property management model. By concentrating our portfolio in a smaller number of select locations we believe we will be able to deliver a superior value proposition to our tenants and consequently our investors. We believe scale will allow us to ultimately own and manage larger, higher quality properties, which typically have higher barriers to entry.
Consequently, we are progressively concentrating our North American portfolio in a number of key industrial markets on the west coast. Reducing our exposure from the current 21 markets to 17 markets in the current property sale program and ultimately four primary markets (Seattle, San Francisco, Los Angeles region, including Riverside).
We are also in the process of internalising our investment and asset management capabilities in the United States. Ultimately we will assume responsibility on a phased basis for property and development management. This strategy will be progressed in stages and is expected to take a number of years to complete.
In Europe, we will be selling our portfolio over the next two years and have commenced marketing our German properties for sale.
Our strategy for our third party property funds management business is to continue to leverage our business model to provide third party investors with superior total returns over the medium to long-term in office, industrial and retail. Our funds management business complements our business strategy by providing additional scale to leverage our operational and leasing capabilities.