Corestate Capital is planning to raise €500m for a fund which will invest in urban developments in German cities.

The real estate investment manager has set up the Stadtquartiere I open-ended ”city quarters” fund and has received an initial €120m in capital commitments from institutional investors.

Corestate said the Stadtquartiere I fund, the “first of its kind in Germany for institutional investors and thus a pioneer in the promising city quarter asset class” in Germany, a sector it believes is worth approximately €200bn.

Stadtquartiere I currently has a €150m pipeline of assets, Corestate said, adding that in-house investment management firm Hannover Leasing is responsible for managing the fund.

According to Corestate, city quarter properties are ”project developments with a mixed-use character that shape the urban district” and represent a part of the development of the urban district.

Nils Hübener, CIO of Corestate Capital, said: “Ten years ago, Corestate was a trailblazer in a new asset class, micro-living, which laid the foundations for a success story for institutional investors throughout Europe that continues to this day.

“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. With our wealth of expertise in the residential, office and retail asset classes, as well as with mixed-used real estate, we have the tools to successfully open up this growth market.”

Charles Smith, head of key clients at Corestate Capital, said: “City quarters are growing in importance, primarily on the back of rising demand for new, high-quality residential properties that meet sustainability criteria or for innovative conversions of existing real estate.

“Unlike Corestate’s conventional residential funds, our new city quarter fund can also acquire properties for its portfolio that contribute to providing functionality or enhancing value in city quarters, such as childcare facilities, retail areas or office space, alongside residential real estate. That being said, the fund has a clear focus on residential real estate.”

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