Corestate is the latest investor to announce a strategy focused on inner-city, mixed-use clusters with the launch of Stadtquartiere I, a new open-ended fund for institutional investors targeting city-quarter assets in Germany.
The vehicle, the first of its kind in Germany according to Corestate, will focus on relevant urban developments in the centre of medium-sized and large cities in Germany. The company has raised an initial €120 mln in capital commitments for the fund, and said that the vehicle is targeting a volume of around €500 mln. Stadtquartiere I will mostly target residential assets but will be open to investment in all other asset classes including office, retail and mixed-use but also childcare facilities.
‘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,’ commented Nils Hübener, CIO of Corestate. ‘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.’
Corestate estimates that the market for modern city quarters in Germany is worth approximately €200 bn. ‘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,’ the company said in a statement. Corestate believes that investors’ demand for this new segment will remain high and is looking to launch further products this year.
Charles Smith, head of Key Clients at Corestate 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.’
The fund has around €150 mln of assets in the acquisition pipeline, Corestate said. The company aims to achieve an average annual return of more than 4% at a maximum debt ratio of 50%. Hannover Leasing, an in-house investment management company, is responsible for managing the fund.
Corestate’s announcement comes in the same day that Vastned, a Dutch retail specialist active in four European countries, said that it would seek to reposition its portfolio around mixed-use clusters of buildings in city centres, as a result of the pandemic.
‘Vastned is entering a new phase with a strategy update,’ commented Vastned’s interim CEO Reinier Walta. ‘The retail market is in transition due to the growth of e-commerce and changing consumer behaviour, and Covid-19 has only accelerated this process. […] Vastned will therefore further optimise and concentrate the property portfolio with the aim of creating a city centre portfolio with a greater degree of diversification of tenant types in historic city centres where shopping, working, living, and leisure go hand in hand.’
