A pair of Swedish businessmen who met in Orange County are planning to invest more than $15 million locally during the next several months in new properties.
Their real estate investment firm, Swede-Cal Properties Inc. of Newport Beach, is funding the expansion using profits from last year’s sell-off of $50 million in holdings in the area to Kilroy Realty Corp., an El Segundo-based REIT.
“Since then, we’ve reinvested the proceeds,” said Jan-Erik Palm, vice president and co-founder of Swede-Cal Properties. “We have acquired 15 different projects in recent months, most of which are in South Orange County.”
All of the company’s purchases have been small, single-tenant industrial buildings. That’s the same type of structure Palm and his partner, Kent Berg, are looking to acquire now.
“Rather than buying a 200,000-square-foot, single-tenant building, we’d rather spread the risk and have 10 smaller buildings,” said Palm. “That way, if one large tenant moves out, we still have cash coming in from the other properties.”
The partners met in the early 1980s. Palm was a real estate entrepreneur and Berg had moved to Orange County to own and operate a medical equipment manufacturing company.
After Berg sold his firm, which is no longer in business, the two formed Swede-Cal Properties in 1989.
“We are both Swedes and both from the city of Gotenborg,” said Berg. “So we had mutual interests and a knowledge of the different ways of thinking between American and Swedish businessmen.”
Seizing on a growing real estate market, the partners decided to try and attract Swedish capital to invest in Orange County properties.
“We flew back to Sweden and met with about 30 different investors over a 10-day period,” recalled Palm. “Then we formed our first limited partnership with six of those people at the end of 1989.”
More investors from Sweden were added before the recession in the early 1990s curtailed Swede-Cal’s activities.
“As the market turned, we concentrated on managing the assets already in place,” said Palm. “So we weathered the recession, and then in 1994 and 1995 we started making additional acquisitions.”
Although they work with new investors all the time by setting up various limited liability companies, Palm says the company has a core set of a half-dozen to a dozen partners from Sweden.
“In a nutshell, Orange County is one of the most unique areas in the world,” he said. “One can combine business opportunities with a Mediterranean climate and great recreational opportunities. And our investors like the fact that this area has such an entrepreneurial spirit with so many up-and-coming companies.”
Also helping to entice new investment dollars from Sweden is a favorable exchange rate. In the late 1980s, Palm said that $1 was worth about 5 Swedish krona; it is worth about 8.4 krona today.
“Besides the dollar being more valuable now to our investors, we have an annual convention every November where they get to come over and meet with local real estate leaders,” said Palm. “They really enjoy that experience, because it gives them an insight into how business is done over here.”
Operating a real estate business and managing properties in a fast-growth market like Orange County, he added, is something most Swedish businessmen don’t have a chance to see first-hand.
“In Sweden, growth is very slow,” he said. “When they see how we build at a level that would be considered a small city over there, they are very taken by the opportunities.”
Berg, who focused on marketing and exporting goods for Swedish companies before moving to OC two decades ago, described Swede-Cal’s investors as anxious to learn new ways to run their businesses back home.
“We have tried to make this whole process an exchange of ideas and a training ground for people to learn how to work better in such a competitive market,” he said.
Berg and Palm see Swedish business interest in Orange County growing even more in coming years. Meanwhile, Berg is exploring expanding the company’s portfolio to other parts of the world. He’s now in Hong Kong as part of a month-long trip to look at opportunities in Asia. He’s due back in early February.
“The Asian real estate market is starting to pick up,” Berg said from a cell phone in Hong Kong last week. “There are a lot of opportunities over here.” n
