Soultana Reigle, Managing Director at Prudential Real Estate Investors, visited Kellogg’s Allen Center for the first installment of the 2013-2014 Executive Speaker Series.
Soultana Reigle, a graduate of Northwestern University and Managing Director at Prudential Real Estate Investors (“PREI”), returned to campus to speak at a luncheon for members of the Kellogg Real Estate Club. Ms. Reigle is responsible for managing PRISA III, a $2 billion value-added fund, and she has been involved with the fund since its inception in 2003. Prior to joining PREI in 2001, Ms. Reigle was a Vice President of Development with Transwestern Investment Company, where she managed office and industrial developments throughout the Midwest, West Coast, and the South West.
Ms. Reigle kicked off her discussion by explaining some technical differences between an open-end fund (like PRISA III), and a more traditional closed-end real estate fund. She explained that closed-end funds tend to have a defined strategy that is limited to a certain asset class or geography, and investors are required to commit to their investment in the fund for a defined period of time. In contrast, an open-end fund typically is less restricted on asset class and deal size, and investors have the freedom to move their money in and out at any time. Ms. Reigle explained that PRISA III is somewhat unusual because open-end funds typically invest strictly in core assets, while PRISA III fund is “value-added”.
When asked what her overall strategy is, Ms. Reigle stressed that her investing philosophy is straightforward; she stays focused on core value, and what adds or detracts from that bottom line. She believes it is critical for her and her team to “touch” the properties they invest in; this means having an intimate understanding of each property’s replacement cost, operating cash flows, and a relationship with any development or management-related teams. She also believes it is important to “go where the money is not”, meaning pursuing investments that aren’t too crowded. Ms. Reigle also always tries capitalize on a first mover advantage, reminding the group that one of the best ways to get a great investment “is to be the first phone call” when an exciting project is taking shape. What does it take to be that first phone call in her opinion? Technical skills, the ability to link themes together to develop a holistic strategy, personal credibility, and genuine trusting relationships built over time with colleagues in the industry.
One interesting trend she highlighted has been the increasing amount of capital inflows into domestic real estate funds coming from foreign sovereign wealth funds. Sovereign wealth funds invested in our domestic real estate market throughout the downturn, and their enthusiasm is not waning. Ms. Reigle thinks that several factors have contributed to this participation. To begin with, these funds have such significant capital levels that they are constantly looking for new opportunities. They needed to put money to work during the crisis regardless of the turmoil. In such an absolute low rate environment, the incremental yield that could be picked up in real estate investments was attractive to those players. Additionally, the American legal system, tax structure, and real estate regulatory environment are all transparent and consistent. This is appealing to these funds, because they incur much greater risks in those areas when investing in real estate in other countries. Ms. Reigle expects their participation in the sector will continue to increase beyond simply investing money in funds, for example via joint ventures in development.
A theme that came up multiple times over the course of Ms. Reigle’s comments was the importance of being a creative thinker in the real estate investments business. She discussed how the overall market is challenging right now; there is a lot of capital chasing deals and the volume of deals coming to market is not nearly enough to meet this demand. Thinking outside the box has helped Ms. Reigle deliver returns to her clients. For example, her team decided to invest in an office development project in Houston well before the recovery and current growth in that market.
To close out the luncheon, Ms. Reigle shared several points of career advice with attendees. She stressed how exposure to a range of professional experiences over time can provide a competitive advantage. In real estate, that might mean trying to work in a range of functions like capital markets, development, construction, and finance. Versatility is rewarded, and Ms. Reigle highlighted several instances where her breadth of experience enabled her to find profitable deals in creative ways. For example, focusing on some development projects has been one way for Ms. Reigle to avoid the sidelines during the financial crisis and create value for her fund beyond more standard deals. Finally, she reiterated how important relationships are in the real estate industry. One’s personal reputation for honesty, a strong work ethic, and good teamwork ability can mean the difference between success and failure. Ms. Reigle’s baseline reminder was that it is key to never lose sight of these guiding principles over the course of a career.