GERMANY - Patrizia has teamed up with a Versorgungswerk to create a fund for institutional investors that includes both existing property as well as redevelopment projects as risk appetite returns to the market.

A "well-known, large Versorgungswerk" in Germany has granted €100m as start-up capital for the fund, but it does not want to be named, a spokesman for Patrizia confirmed to IPE.

The fund Wohnmodul I, which seeks to raise €250m, will invest in existing properties as well as renovation and redevelopment projects, which is "unique in Germany", the real estate company said.

Wolfgang Egger, chairman at Patrizia, said: "The fund is an innovation, as, for one, the investment horizon is widened to redevelopment projects, and additionally, flats can also be sold during the investment phase."

The company noted that this fund was opening the whole of Patrizia's value-creation chain up to institutional investors.

Patrizia's spokesman added: "We notice that investors are willing to go outside the core market if the location is right and if they have the right partner with enough experience to manage the risk."

He said investors were happy to find returns of more than 4% in a market where core property was heavily fought over.

Patrizia expects the new fund to return around 50% above core residential property over the whole duration of the fund.

In other news, HSH Nordbank said in its latest market study that the shortage of core real estate in Germany would lead to investors taking more risk and making more investments in project developments.

According to HSH Nordbank, the investment risk on the German office market is currently on a "low to medium level", which makes the upcoming quarters fertile ground for deals.

However, the bank expects the risk in the retail property market as a whole to increase from year-end 2012, as lower yield, pushed down by higher transactions, is counterbalanced by rapidly increasing interest leading to a drop in risk premiums.

In 2013, HSH Nordbank sees these developments "speeding up" further, with the spread, which is currently at more than 250 basis points, falling to "well below" 200bps.