Nestled within four stories of the 801 Grand building is the nation’s fifth-largest real estate manager.

Principal Real Estate Investors, a division of Principal Financial Group Inc., owns or manages a variety of buildings, including office and residential properties in dozens of cities across the United States, including Chicago, Atlanta and Los Angeles. All told, the division, which is part of Principal asset manager Principal Global Investors, has $24 billion committed to real estate acquisition, property management and the financing of commercial building projects.

As the nation’s largest manager of 401(k) retirement plans, Principal, which tends to focus on small to medium-sized businesses, takes in an enormous amount of money from workers around the world as they save to provide for old age.

Indeed, last week the company, which is Iowa’s most valuable by market capitalization, said its assets under management rose to $134.8 billion in the third quarter, a 15 percent increase from a year ago.

The company employs a variety of vehicles to invest those assets in everything from stocks and bonds to real estate. Principal Real Estate Investors tends to mirror Principal’s strategy of focusing on small and midsized clients by buying or managing smaller or lesser-known real estate assets. The strategy means that the company, unless directed by a particular client, isn’t likely to buy Chicago’s John Hancock Building or New York’s Empire State Building.

The real estate division’s profile has risen in recent years as stock markets have swooned. Today, Principal Real Estate Investors manages about 73 million square feet of space in over 770 buildings. The company focuses on the nation’s 60 largest cities.

Leading the division is Patrick Halter, a University of Wisconsin M.B.A. who has spent nearly two decades at Principal.

“Real estate has performed very well over the last few years,” Halter said. “There’s been a lot of attention placed on real estate, resulting in more capital flowing into the market. With more capital comes competition, and it’s becoming more challenging to find the investment that makes good sense.”

Part of the company’s strength in real estate stems from its history. Principal has been buying and managing property and buildings for nearly 60 years, Halter said. Also helping find good investments are the real estate division’s 300 workers, half of which are real estate professionals, Halter said. Each specializes in a certain market and gets to know that city as a local would. Travel is a frequent part of the job.

“Their access to transactions and their understanding of markets lets us cherry-pick and find the best investments for us and our clients,” Halter said.

Principal Real Estate Investors has two elements that help mitigate its risk of being caught on the wrong side of interest rate movements. The division’s fixed-income department provides financing for commercial real estate projects and is capable of handling appraisal, research, engineering and closing services to customers. The department accounts for the bulk of Principal Real Estate Investors’ total assets, amounting to about $15 billion.

The division’s equity department oversees about $9 billion that’s used to buy and manage real estate both for its corporate parent and for outside clients. It has authority to buy buildings up to $100 million in value, though it typically spends between $5 million and $30 million, Halter said.

To spur growth, Principal Real Estate Investors has been working to win new clients and has signed on such blue-chip pension funds as the California State Teachers’ Retirement System and Taft Hartley Funds. It has taken in $2.6 billion in new assets, including $550 million from CALSTERS, and is striving to expand its roster of clients beyond the United States to Europe and Asia, Halter said.

“They’re looking for somebody to put their trust in to help them navigate the U.S. real estate market,” Halter said.

To build its reputation further, Principal Real Estate Investors signed an agreement recently with Real Estate Research Corporation and Torto Wheaton Research to collaborate on an annual real estate report called “Expectations and Market Realities in Real Estate: 2004.” The report will be available in electronic form by mid-month and will be published on hard copy in December.

“It’s a small but important example of how we can get the Principal name out there,” Halter said. “It’s read by decision-makers.”