Corestate’s German fund lands €40m

Private equity investor Corestate Capital has raised another €40m of equity from one investor for its German commercial fund.

The fund buys office and retail assets with value-added potential and gears relatively highly, at a 60-65% loan-to-value ratio, and targets 12-15% returns.

Corestate said the equity adds around €120m of extra investment capacity, taking firepower to €150m to invest in Germany, Austria and Switzerland.

The fund was launched in 2007 and raised about €75m at its first closing. Corestate aims to raise another €30m by a final closing this summer.

Chief executive Phillip Burns said fund raising in 2010 had been “horrific” and remained difficult, but “investors have shown an understanding of the necessity to deliver added value  to achieve attractive returns.

“Secondary locations with strong tenants are under-priced in German-speaking countries and banks are hesitant to provide debt for these assets. As a result, Corestate has significant opportunities to buy properties below larger institutions’ radar.”

Last month the fund paid HSBC Trinkaus €25.5m for a 14,000m2 Hannover office and retail building, €4.5m below the market value, at a 7.9% yield.

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