KGAL Investment Management has raised an initial €370m for its sustainable German residential real estate fund.

The KGAL Wohnen Core 3 Fund, which expects to raise €400m at its second close, can be expanded up to a hard cap of €500m in equity. The maximum leverage is 50%.

The manager said the fund has a €240m pipeline of deals and expects to close a major investment in Munich shortly.

KGAL said in line with the group’s climate strategy, the fund’s environmental, social and governance (ESG) strategy means that all target properties must undergo comprehensive ESG due diligence in advance.

André Zücker, managing director of KGAL Investment Management responsible for real estate, said: “Social aspects such as affordable housing also play a major role as part of this review. In every case, we ensure that the fund is climate neutral by means of KGAL making a compensation payment for non-avoidable CO2 emissions.”

Florian Martin, managing director responsible for KGAL Investment Management’s institutional clients, said investors are convinced by KGAL’s ESG strategy and the “quantitative, research-based scoring model we use to identify high-potential locations”.

Martin said due to the high current placement volume and the soft commitments already made for the second closing, “we confidently expect to place the fund this year beyond the original target volume of €400m.

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