Corestate sets up open-end special AIF “Stadtquartiere I”, the first of its kind in Germany for institutional investors

Corestate, an independent real estate investment manager in Europe, has set up Stadtquartiere I, a new open-end special AIF. This fund is the first of its kind in Germany for institutional investors and thus a pioneer in the promising city quarter asset class. Investments are focused on relevant urban developments in the centre of medium-sized and large cities in Germany, which enhance and determine the quality of the respective location. Corestate is aiming to achieve a target volume of around € 500 million. Hannover Leasing, an in-house investment management company, is responsible for managing the fund.

Nils Hübener, CIO of Corestate: “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.“

Segment with long-term stability|Attractive for ESG-focused investors|€ 200 billion market

Corestate estimates that the market for modern city quarters in Germany is worth approximately € 200 billion, which is why the company is expanding its investment focus on these areas with the new funds and planning to further intensify its activities in this core segment. 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. Corestate firmly believes that demand will remain high and is looking to launch further products this year.

Charles Smith, Head of Key Clients at Corestate: “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.”

€ 150 million pipeline|Special valuation system secures location quality

The fund’s current pipeline includes assets worth approximately € 150 million, located in medium-sized and large cities in Germany. Corestate uses an internal valuation system to select locations, ensuring that only cities that achieve a defined minimum score in the social and economic parameters qualify for the fund. This approach is geared towards taking into account the high standards of location criteria that are particularly important in this asset class. Corestate aims to achieve an average annual return of more than 4% at a maximum debt ratio of 50%. Capital commitments of € 120 million have already been received and the fund remains open to further investment.