Principal, Macquarie Team Up on CMBS

NEW YORK CITY—The Macquarie Group and Principal Real Estate Investors said Friday that they have partnered on a new CMBS platform. Known as Principal Commercial Capital, the lending platform is focused on originating and securitizing commercial mortgages in the CMBS market, and wll be jointly managed by Macquarie and Principal.

“There will be a substantial volume of commercial mortgage loans maturing over the next few years,” says Timothy Gallagher, New York City-based managing director and head of commercial real estate markets at Macquarie. "That provides Macquarie with a sound opportunity to establish a CMBS debt platform in the US."

Gallagher's counterpart at Principal Real Estate, managing director Margie Custis, says her company is “very excited to launch this platform and expand our presence once again in the CMBS market. This venture will enable Principal Real Estate Investors to offer a wider menu of options for our borrowers and leverage the strengths of both firms.”  

Gallagher adds that his firm and Principal Real Estate, the dedicated real estate group of Principal Global Investors, have “highly complementary teams and areas of expertise. Our shared vision and discipline differentiates us from other CMBS lenders, and we look forward to serving both borrower and investor clients.”

Principal Real Estate will source, underwrite, close and service loans. The US arm of Sydney-based Macquarie will provide funding and capital markets expertise.

Through its affiliates, Principal Real Estate can call on a lengthy track record as a CMBS loan originator and seller. The firm has contributed almost 2,000 loans totaling more than $16 billion to more than 50 securitizations, including the TOP and PWR shelves.

Bloomberg reported on Friday that the partnership occurs as the CMBS market is regaining momentum and insurers increasingly are looking to commercial real estate to generate returns. Thus far in 2014, Wall Street banks have arranged about $54.6 billion of US CMBS, after issuance doubled to $80 billion in 2013, according to Bloomberg.

And in another CRE partnership between a US firm and an overseas one, MetLife last December teamed up with Norges Bank Investment Management to invest in US office properties. The joint venture has already made acquisitions in Boston, Washington, DC and San Francisco.

Principal Financial Group's CEO, Larry Zimpleman, has pointed to opportunities in commercial property for a number of years. “Smart capital is starting to queue up,” he told Bloomberg in 2010. Principal currently manages or sub-manages about $52.6 billion in CRE assets, a sum that's more than 50% greater than four years ago.

For its part, Macquarie, which hired Gallagher from Morgan Stanley to lead a US CRE expansion earlier this year, has now bolstered his CMBS team. Two days before the partnership with Principal was announced, Macquarie brought aboard Phil Miller and Charles Citro as managing directors, Stephen Schwartz as SVP, Conor D'Alton as an associate in CMBS trading and William Sandford as a credit analyst.