(Read more on the debt and equity markets.)

DES MOINES-Armed with a three-year investment scenario, Principal Real Estate Investors LP has launched its first commingled debt fund with $225 million of equity. The leveraged plan for Principal Mortgage Value Investors LP will generate more than $1 billion for value-added commercial real estate financings, including bridge loans and subordinated debt.

Principal Life Insurance Co. has kicked in 10% of the equity; the balance is coming from US investors, who were rallied during a short road show. “This will enable us to do more of what we’ve already been doing,” Margie Custis, managing director for the locally based Principal, tells GlobeSt.com about the addition to the full-service lending platform. It is projected that a commercial real estate CDO will be issued in early 2008.

Custis says the structuring allows for a fixed-rate or floating-rate interest, but the expectation is there will be more of the latter. Bridge loans will have two- to three-year terms and subordinated debt will be in the three- to seven-year range. The financing criterion is “major property types primarily in major geographical areas,” she says. Principal’s platform, until now, generated higher-yielding investments through affiliate, Principal Commercial Acceptance.

According to Custis, the difference between the Principal platform and its competitors is that there is no reliance on secondary markets for bridge loans or subordinated debt like B-notes or mezz pieces. The new fund recently went into play, with $80 million of value-added real estate being financed to date.

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