Principal, US Bank Join Forces for CMBS

DES MOINES, IA-Locally headquartered Principal Real Estate Investors and Minneapolis-based U.S. Bank National Association are forming a new company, Principal Commercial Funding II, which will compete in the commercial mortgage backed securities market. The new company will focus on securitizing commercial mortgages originated by its two owners.

PREI managing director Margie Custis says the upshot is the new company gets US Bank into the securitization business and gives PREI the ability to grow its platform. PREI will provide all customary CMBS business management functions for the new company and US Bank will provide a warehouse facility and cash management services. Both parties will originate loans on behalf of the venture, which will have about 175 loan originators sourcing investment opportunities across the United States.

US Bank is a significant real estate lender, with over $27 billion in real estate assets under management. It provides secured real estate loans, unsecured credit, syndication, structured finance and mezzanine lending.

PREI is the nation’s fourth largest institutional real estate manager, with about $30 billion in debt and equity commercial real estate assets under management. PREI primarily focuses on providing non-recourse financing solutions for stabilized property including first mortgages and credit tenant loans, as well as some construction, bridge and mezzanine financing.

PREI chief executive Pat Halter says the arrangement will allow the companies to leverage their independent and complementary strengths to create a nationwide platform. Joe Hoesley, head of U.S. Bank’s commercial real estate business, says the agreement gives US Bank immediate access to Principal’s CMBS expertise, enabling the bank to provide clients with long-term non-recourse commercial mortgage finance solutions.

Principal Commercial Funding II will begin operations immediately, and will begin contributing collateral to securitizations during the first quarter of 2006. Custis says PREI’s original Principal Commercial Funding, which has been in existence since late 1990s, is being wound down, and the capital from that business will be put into the new business.