JER's Pralle To Focus on Global Platform

McLEAN, VA-Michael Pralle, the new president and COO at J. E. Robert Cos., has only been on the job for a few days so he is not ready to lay out his strategic vision for the firm for the next 10 years, he tells GlobeSt.com. One thing of which he is sure of, however, is that JER’s investment focus will be increasingly on global markets. Pralle, with an extensive background in international real estate investment, is gearing up to duplicate and hopefully exceed his accomplishments at GE Real Estate, where he was also president and CEO managing a global business portfolio of over $78 billion in assets in 28 countries.

“[JER] is at an inflection point where it has an opportunity to accelerate its global investment,” Pralle tells GlobeSt.com. “Right now it has a great platform with multiple [international] funds. It is a very exciting time for the company.” Indeed, just a few examples of JER’s global reach include the Marbleton Property Fund, a $321-million equity pool that will focus on investments across all property sectors in Russia and Ukraine, JER Europe Fund III, which has a total buying power of up to $5.4 billion, and growing investments in Latin America.

“We see many opportunities outside the US and want to be positioned well to take advantage of them,” he says. Among these opportunities is the simple equation of less capital chasing deals and the inherent benefits of global diversification. For instance, he says, at GE he never ran up against Blackstone in Japan, “but in the US when we looked at EOP [for possible acquisition] there was Blackstone. Also, diversification is a cornerstone of any good investment policy: if one market goes down it doesn’t necessarily have to bring down an entire portfolio.”

Pralle points to markets such as Brazil and Mexico where–especially in the case of Mexico–there is a risk premium attached to investment sales prices that Pralle feels is not justified. He describes a hypothetical sub assembly plant outside of Monterrey occupied by a European firm that pays rents in dollars and is a good credit. A similar facility would price much higher in Texas simply because of its location in the US.”It has come down in recent years but Mexico has always had a macro-economic risk premium that I didn’t think was justified,” he says, adding that Japan is another market with excellent investment upside. “Real estate prices are nowhere near their peaks and investors can buy an office building in Tokyo and hold it for appreciation. Many parts of Southeast Asia are attractive for similar reasons.”

Not that the US is devoid of investment promise, he notes. “Offices may be overpriced in some markets like New York, but there are still opportunities in other markets.” There are also institutional investors that are still increasing allocations to real estate from what were originally very low bases. “It is easy to forget when you work in the field every day but there are still a lot of investors here that have never invested in real estate and for them it is a relatively new asset class.”