X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Michael Pralle likes building things, like turning GE Real Estate into a global real estate investment and finance powerhouse with $77 billion of assets under management. A medley of his hits as president and CEO would have to include the $2.2-billion purchase of 147 Crow Holdings assets and the purchase of Arden Realty for $4.8 billion. But Pralle is ready for new challenges, and in one of his first interviews since taking on the position of president and COO of JE Robert Cos.–he was ensconced for only three weeks when we tracked him down–he talks about the GE departure and legacy and explains where he would like to take JER.

GlobeSt.com: So, were you looking?

Pralle: I had been at GE for 18 years, and a year ago, I began to think about pursuing a more entrepreneurial opportunity in the private equity world. I considered going out on my own and raising a fund, but that would require working capital and would take a certain amount of time to build a global investment business. And that’s what I wanted. That’s what I had built at GE. I concluded it was better for me to go to a platform that already had traction, and JE Robert already had significant history and significant platforms in Europe and the US. Also, it was building a presence in Russia and Latin America. It had created some very good platforms and a gold-plated list of investors that would enable the firm over the next five to 10 years to become more of a global investment firm. Given my background and track record, I thought I could help.

GlobeSt.com: It also came at a time of some shake-up there, such as Cia Buckley leaving. Any cause and effect?

Pralle: No, I don’t think so. I spoke with Cia before coming here and her departure was solely to take advantage of another opportunity. I had had conversations with a couple of private equity firms, and those discussions led to a decision to leave GE because I couldn’t in good faith continue to negotiate with firms while there. Once it was out that I was a free agent, I met with Joe [Joseph E. Robert Jr., JER's founder], and over a series of meetings we started talking about our investment philosophies and we had a lot in common. That was sometime in July. I was also having discussions with a handful of other firms–large institutions, a big hedge fund and private equity firms. In August I continued my discussions only with a larger institution and Joe and determined that this platform was what I wanted to do. I mean, why leave GE and run another big institution’s real estate business?

GlobeSt.com: Let’s stay with GE a minute. You said you had been thinking for a while and that Joe had a like mindset. Does that imply that GE was no longer a fit?

Pralle: For the seven years I was with GE, we built the real estate business into a very large business–it comprised 10% of earnings. The balance sheet exposure was $64 billion, and there were $77 billion of assets under management. There was a lot of speculation on the part of the analyst community that the business had become too big and that GE should consider selling it in its entirety or selling it down.

I became concerned ultimately that we wouldn’t be allowed to grow the business, and I enjoy building businesses. This isn’t a criticism of GE. It’s a great company and I’m still a major shareholder. Looking at it from the perspective of the chairman, he had a huge real estate business that was non-strategic to GE. It’s not about infrastructure or healthcare or entertainment. It’s just a business that made a heck of a lot of money, and that’s a double-edged sword. I concluded that there was a lot of ambivalence on the part of senior management as to what they wanted to do with real estate.

GlobeSt.com: There was some scuttlebutt about the abruptness of your departure.

Pralle: Senior management became aware that I was talking–with one private equity firm in particular. We had a discussion about that and they wanted a commitment from me to stay for a couple of more years. I couldn’t make it.

GlobeSt.com: So, for the record, this was your choice?

Pralle: Yes it was.

GlobeSt.com: I hate talking legacies, but what do you leave behind at GE?

Pralle: There are two ways to answer that question. In terms of real estate, our team took a largely domestic lending business and turned it into the world’s largest real estate investing and finance business. We truly globalized the business; two-thirds of our earnings came from outside the US. In terms of my own leadership, I stood for respect for the individual and creating an environment where people were motivated and felt part of something greater than themselves.

GlobeSt.com: Now we can start looking forward. Are the credits transferable?

Pralle: They are. I’ve been here only three weeks, but I see a very talented, motivated group of people. I hope to build on the environment that’s already been created here. I hope to help make a more growth-oriented environment where people can identify with the company as a whole. In the private equity world, turnover is looked upon with concern. Investors want to see continuity. It all sounds a little fluffy, but it’s fundamentally important. People leave a job either because they are presented with such a great opportunity that it’s the right thing to do or because they aren’t being fulfilled. I want people here to feel they’re a part of something good and growing.

GlobeSt.com: Where do you want to expand the platform?

Pralle: We’ve already closed a sizable fund in Russia and we have a well-placed partner there–Alfa Bank. It’s a different market from Western Europe, so the jury is still out on Russia. But it’s exciting, especially for me because I haven’t had experience there. In Europe I continue to like Scandinavia, which is a very stable set of economies. I like Central Europe because there’s big demand and not enough supply. We’re looking at Latin America, where Joe already has great relationships. There are rapidly growing middle classes in places like Brazil and Mexico, and they’re accumulating significant pools of wealth. They want more retail; better offices; and most important, better housing. There’s a tsunami of demand in some of these economies.

GlobeSt.com: Will you consider all products?

Pralle: I would concentrate primarily on retail, multifamily and office, but I wouldn’t rule out hotels or resorts or industrial and logistics. It all ties together with the macroeconomic growth of those economies.

GlobeSt.com: What’s the timing on rollout?

Pralle: In the immediate future we want to continue to invest in the US, and the opportunities are there because of the deals that have become unglued. Debt financing is more expensive and with lower loan-to-values, some deals aren’t going to work, so there’ll be opportunities here as well as in mezz debt that’s being repriced. Over the summer you had a repricing of risk and that’ll create opportunities. So in the immediate term there’ll be some debt opportunities here and Europe and in the longer term there’ll be equity opportunities. Latin America and Russia are also near term, and in three to five years we’d be looking at opportunities in places like Southeast Asia and Japan.

GlobeSt.com: Where do you want JER to be in five years?

Pralle: We manage about $8 billion in assets today, but if we don’t at least double that I’d be disappointed.

GlobeSt.com: Given what you’ve said, will there come a time when you’ll say JER isn’t for you anymore?

Pralle: I’ve only had two employers since I got out of grad school–McKinsey and Co. for eight years and GE for 18. I think of this as my last really big job. I’m 51 year old. I want to do this for another 10 years or so. There’s tremendous opportunity over the next 10 years. I told everyone when I was looking at opportunities beyond GE that I wanted to make the right call now and be there for the duration of my career.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.