Union Investment has given Deutsche Asset One a German residential property mandate.
Deutsche Asset One, a Dupuis Investment & Asset Management company, will set up an open-ended fund investing in residential real estate across Germany.
The vehicle has an initial €170m to invest.
Union Investment said the special investment fund was formed through a pure equity club deal with German institutional investors.
Investment will be split across A cities, B cities in metropolitan regions and selected C cities with particularly above-average spending power and anticipated population growth.
Thilo von Stechow, managing partner at Deutsche Asset One, said the vehicle had investments worth “hundreds of millions of euros” in the pipeline undergoing due diligence.
“The mixture of cities and the combination of existing properties with new projects allows us to achieve a well-balanced portfolio structure with higher rent yields compared with a portfolio encompassing just new project investments or A cities,” he said.
“The value of these existing properties can be enhanced through proactive portfolio management. We are marrying potential for cash dividends with long-term value creation.”
Despite the rise in real estate prices across the board, the residential investment market still offers long-term opportunities, he said, with the sector meriting a “permanent presence in the real estate portfolio of any German institutional investor”.