Principal, Macquarie Team Up to Tackle CMBS Market

In a combination of Midwest and Down Under, U.S.-based Principal Real Estate Investors, the real estate arm of Principal Global Investors, and Macquarie Group, out of Sydney, Australia, are creating Principal Commercial Capital, which will focus on originating and securitizing commercial mortgages in the CMBS market.

In a combination of Midwest and Down Under, U.S.-based Principal Real Estate Investors, the real estate arm of Principal Global Investors, and Macquarie Group, out of Sydney, Australia, are creating Principal Commercial Capital, which will focus on originating and securitizing commercial mortgages in the CMBS market, the two companies announced Friday.

They manage the nationwide lending platform jointly, with Principal Real Estate Investors sourcing, underwriting, closing and servicing loans, and Macquarie providing funding and capital markets expertise.

“Principal Real Estate Investors and Macquarie have highly complementary teams and areas of expertise,” Timothy Gallagher, managing director & head of CRE markets for Macquarie, said in a release.

Through its affiliates, Principal Real Estate Investors has a substantial record as a CMBS loan originator and seller, having contributed almost 2,000 loans totaling more than $16 billion to more than 50 securitizations, including the TOP and PWR shelves.

And Macquarie recently hired a team of CMBS veterans, led by Gallagher, to expand its presence in the U.S. CRE market.

“We are seeing a lot of firms rebuilding their CRE/CMBS platforms over the last year or so,” Joe McBride, a research analyst with Trepp L.L.C., told Commercial Property Executive. “Commercial property values seem to have come all the way back in most of the major markets, but I think investors are still finding value in CRE. There will need to be plenty of capacity in terms of origination over the next three years as almost $340 billion in maturing CMBS loans come up for refinancing.”

About two weeks ago, Trepp released its August 2014 U.S. CMBS Delinquency Report, which found that CMBS delinquencies had increased for the first time in more than a year, rising by six basis points in August.

“While delinquencies have fallen 133 basis points from the start of 2014, the rate of distressed loan resolutions has continued to taper off from the pace of 2012 and 2013,” according to the report. It quoted Trepp senior managing director Manus Clancy as saying, “All good things must come to an end at some point. The days of double-digit month-over-month improvements for the CMBS market may be behind us for a while.”