Brutten: After talking with investors and scouting out Germany, the Czech Republic, Hungary, Switzerland and the Netherlands, we decided to open an office in Switzerland because of its central location. It's easy to travel to other European countries from here, and it has a very strong rule of law. The legal system is easy to understand and interpret. It's a good place to do business, though it's difficult to get established.

Q: Are you buying in Switzerland or just working from there?

Brutten: We're actively looking to buy here. We have several letters of intent out and three properties in escrow. Once you get past the language barrier, the market dynamics are very tight, with low vacancy and strong demand. The supply/demand equation is balanced here. Why not start in a stable market and stable country, where laws are well conceived and tight? It takes some risk out.

Q: What is the greatest advantage of investing in Switzerland?

Brutten: Competition is less than in some countries and certainly less than in the US. There are laws against foreign investment here. Those laws have scared away a lot of the competition. But the laws are being relaxed every year and in the next three years, we feel they will be abolished. Until then, there's not a flood of competition.

Q: Will you be branching out to other countries?

Brutten: Each country has its own set of laws and market dynamics, which makes it tricky to bounce from country to country unless you have a knowledgeable local source as a partner. Real estate is really a parochial business, a neighborhood business. You can't jump into a foreign country without some insider knowledge, lest you lose your shirt. But we have contacts in Germany and the Netherlands. We picked those countries to move into after we've been here a year or so. I've been to Russia half a dozen times. The opportunities in Russia are tremendous, but we'll have our hands full here for the next couple of years. We don't want to plan further out than that.

Q: Are you looking for the same type of properties as in the US?

Brutten: No. We have a two-pronged strategy here. One is value-added, acquiring properties we can release, lease up, rehabilitate or reconstruct. The other is sale-leaseback acquisitions, where we acquire properties from corporate sellers who are looking to monetize their assets. There's quite a bit of that activity, given that about 70% to 75% of commercial real estate in Switzerland is corporate owned. It's different from the US, where 75% is investor owned. Real estate is not a popular investment vehicle here. It's a working tool for companies. The sale-leasebacks are almost all logistics centers. The opportunity deals are office and retail, primarily office. Q: Why the separation?

Brutten: It's difficult to find industrial opportunity deals. There are almost no industrial vacancies. Since users own 75% of the properties, they don't turn over that much. There are almost no multi-tenant properties. A property is built by Siemens, for example, for use and occupancy by Siemens for 30 to 40 years.

Q: What does this means for Westcore's US investing?

Brutten: It won't be cut back because of this, but it will be cut. It's really a function of the market, rather than any influence of the Swiss operations. I think the goal for this year is about $200 million in US acquisitions. I believe we're right on track to do that number. That's down from $350 million last year. We still have three offices in California that are actively acquiring.

Q: And what about European investment goals in general?

Brutten: When I first landed here, I took a conservative approach and said we would invest just $50 million the first year. But it looks like it's going to be up to $150 million. Over a five-year period, we'll clip along at $200 million a year in volume through the operation of multiple offices. I'm not exactly how sure that'll be divided up yet. We can easily acquire $100 million per year of Swiss real estate during the next five years.

Q: What are the major differences between investing in Europe and the US?

Brutten: The system in the US is much more streamlined. It's very difficult to get deals done here, and it takes a lot longer. The legal system is slow, sellers are not hasty about anything they do and due diligence takes longer. In addition, the hours in the workday are shorter. From noon to 2 pm, all offices are closed. And there are many more holidays, so the lawyers and professionals necessary to complete a transaction are not here all the time. In addition, you don't have the same transparency in terms of collection of data. Information is not freely or readily attainable on many of the companies in Switzerland. A lot of companies are private and don't publish their financial information. Consequently, personal relationships are paramount. Without those relationships, you can't get accurate data.

Q: What about property costs?

Brutten: It is expensive here. Real estate is quite dear. Class A properties sell for cap rates of 4.5% to 5.5% in central Geneva and Zurich. That said, interest rates are the second lowest in the world, lagging only Japan. So there is still a positive spread available of 200 to 300 basis points. That allows for good, positive flows. Cap rates on sale-leasebacks are anywhere from 6% to 8%, which are favorable compared to the US. They're higher because a lot of the corporate credits are not transparent. It's more difficult to underwrite credit because of that.