Possibilities to Reduce the Information Gap between Foreign Investors & the Swedish Real Estate Market : The Importance of Cooperation with an Operating Partner

Abstract: This master thesis project aims to evaluate the importance of availability of operating partners for foreign investors as they decide whether or not to make an investment on the Swedish market. The study will also evaluate if the cooperation with operating partners could contribute to a reduction of the information gap between foreign investors and the Swedish real estate market, and if that could ultimately lead to an increase in the inflow of foreign capital to Sweden.  The study includes a literature review where relevant theories for the research question is accounted for as well as an overview of the Swedish real estate market. The study also includes economic statistics and transaction data from reliable sources, as well as an empirical analysis with semi-structured interviews that were conducted with a number of prominent actors within the real estate sector, both in form of representatives from larger global consultant companies and well- known operating partners. All the interviewees were selected because they were considered to be most useful for the study, with substantial knowledge and experience of the real estate business and market.  The study shows that an operating partner could make it easier for a foreign investor to enter the Swedish real estate market. This is much thanks to the market specific competence which the operating partner firms possesses, making it possible to estimate the right risk component as well as understand the specific market. This could make a foreign investor more competitive on the Swedish real estate market which have a great amount of strong domestic investors. The access to good market specific competence however only seems to have a marginal impact on whether or not an foreign investor chooses to invest in Sweden, this since there are other factors that has a considerably larger impact when investors makes that decision. The scale of the market is one of the most important factors when foreign investors decide whether or not to invest in Sweden. Even though an operating partner might not increase the foreign investments to Sweden there still is a pronounced shortage in the supply of such firms today since there is a large demand from foreign investor for this type of market specific competence. The number of operating partners will most likely increase in the future since the model creates an alignment of interest between the parties. If a foreign investor is good at utilizing local expertise, and uses a good model for alignment of interest, a combination of a global and local view of the market is obtained. This makes it possible for larger foreign investors to create a structure of a larger international portfolios, but still with attention to local details. From this it can be concluded that an increased supply of operating partners in some sense should have a positive effect on the Swedish economy as a whole.