REAL ESTATE – Germany’s DEGI said its €1.3bn international property fund has made its first acquisition in Luxembourg city, investing €110m in two new office buildings in the Kirchberg financial district.

DEGI, a unit of Allianz Global Investors, said the buildings would be completed by 2008 and that the developer, CODIC of Belgium, would be providing a guarantee on rents for the objects.

It noted that vacancy rates in the Kirchberg district – home to several banks, financial service companies and EU institutions – were under 3%.

Generally speaking, “Luxembourg’s economy sets itself apart from the rest of Europe with growth of 4% and a low unemployment rate,” DEGI added.

The fund, known as DEGI International, is one of three open-ended real estate funds in DEGI’s portfolio. The other two property funds are its €5.5bn core German fund, known as DEGI Grundwert-Fonds and a new fund called DEGI Global Business that is targeted to institutional investors.

After its Grundwert-Fonds was hit by €271.5m in outflows during the first 11 months of 2005, DEGI said in December that it would diversify the fund away from the German commercial property market, which has slumped since 2001.

As a result, by 2009, the Grundwert-Fonds will be 60% invested in Germany, with the remaining 40% invested abroad, though mostly in Europe. In December, the fund was 86% invested in Germany and had a return of around 2%.

DEGI International, on the other hand, had €413.8m in investor inflows between January and November 2005.

Separately, LB Immo Invest, a property fund provider owned by Sparkassen, or state-owned savings banks, said it had hired a third managing director.

LB Immo Invest said the new managing director, Hans-Dieter Martin, would be in charge of client acquisition, particularly among German insurers and pension funds.

Since its launch in 2002, LB Immo Invest has unveiled ten funds, all of whom are targeted to institutional investors. The funds have taken in more than €1bn.