Frankfurt-headquartered Corestate Capital Holding has set up a new open-end special AIF aimed at investing in urban developments in the centre of medium-sized and large cities in Germany.
Corestate is targeting a volume of around € 500 million. The fund’s current pipeline includes assets worth approximately € 150 million. Corestate aims to achieve an average annual return of more than 4% at a maximum debt ratio of 50%. Capital commitments of € 120 million have already been received and the fund remains open to further investment
Corestate said in a statement that Stadtquartiere I – city quarters 1 – is a pioneer in the promising city quarter asset class and is the first fund of its kind in Germany for institutional investors. Its investments will also be selected because they “enhance and determine the quality of their respective location”.
Although the fund has a clear focus on residential real estate, unlike Corestate’s conventional residential funds the city quarter fund can also acquire properties that provide functionality or enhance value in city quarters, such as childcare facilities, retail areas or office space.
Corestate estimates that the market for modern city quarters in Germany is worth approximately €200 billion. It said that the challenges presented by the coronavirus crisis have shown that an asset class with long-term stability, such as city quarters, is particularly appealing to ESG-focused investors. Corestate firmly believes that demand will remain high and is looking to launch further products this year.
“Ten years ago, Corestate was a trailblazer in a new asset class, micro living,” said Corestate CIO Nils Hübener. “Now we see similar potential with city quarters here in Germany, which is why we want to take a leading role in developing this market at this early stage.”
Corestate has an evaluation system to ensure that only cities which achieve a defined minimum score in the social and economic parameters qualify for the fund. The company said this approach takes into account “the high standards of location criteria that are particularly important in this asset class”.
Hannover Leasing, an in-house investment management company, will manage the new fund.