With Citigroup Inc.’s recent acquisition of Principal Residential Mortgage Inc., there’s speculation that the company’s CitiMortgage subsidiary will eventually build its own facility in Greater Des Moines.

However, with an abundance of leasable space in the metropolitan area, there are no immediate plans to build, said David Schneider, CitiMortgage’s president and chief operating officer.

CitiMortgage assumed the leases Principal had for its space on nine floors in the Hub Tower space and a South Side office building on Park Avenue, both of which Schneider said should again be fully occupied by late 2005.

“The way it is (with office space) right now works very well,” said Schneider, who visited Des Moines last week to meet with Principal Residential managers and employees whose jobs were transferred to his mortgage company. “It really doesn’t pose any operational difficulties for us to be in two different sites.”

Des Moines will be a platform for CitiMortgage’s continued growth, particularly in the lucrative home equity lending business, Schneider said.

“The home equity business has been growing very, very rapidly for Citi in the past few years, and now we’re looking at Des Moines as a place where we can continue that growth,” he said. Des Moines will serve as a secondary hub for CitiMortgage’s operations, similar to existing facilities the company has in Frederick, Md., and Southfield, Mich.

Additionally, CitiMortgage’s sister company, Citibank Home Equity Lending Division, plans to add 250 jobs in Des Moines by mid-2005, after running out of room at its 4,800-person St. Louis headquarters. That will make Des Moines a secondary location for Citigroup’s home equity operations as well.

“We just grew faster than we thought we would, which is a very good problem to have,” Schneider said.

Through acquisitions and internal growth, CitiMortgage has tripled its dollar volume of loan originations in the past three years, from approximately $30 billion in 2001 to nearly $100 billion in 2003. During the same period, the volume of existing loans it services has increased by 50 percent, to $150 billion.

The $1.26 billion acquisition of Principal Residential, which was finalized July 1, gave Citigroup “a chance to buy a company with a proven track record, quality management and a good customer base,” Schneider said, not to mention a quick means to deepen its management roster with experienced talent.

The deal also allowed CitiMortgage to increase its mortgage portfolio by 1 million customers overnight, boosting its customer base to approximately 2.4 million.

Though the elimination of duplicate functions will result in nearly half of Principal Residential Mortgage’s 800 employees in Des Moines being laid off by the end of the year, hiring for new positions should replace those job losses by the end of next year, said Bill Beckmann, president of Citigroup Real Estate Servicing & Technology. Beckmann said the division will add about 150 jobs in the next year, as the company shuts down a customer call center in Overland Park, Kansas, and moves the operation to Des Moines.

Elimination of duplicate back-office functions account for the bulk of the anticipated layoffs in Des Moines, Beckmann said.

In the long run, the depth of positions that will be needed will require a wide variety of skilled professionals, said Jon Baymiller, Principal Residential Mortgage’s former chief operating officer, who will head the Des Moines operations.

“The prospects of hiring for all levels of skill sets in the Des Moines area makes this community a good place to grow,” he said.