Cresco targeting €200m for first German development fund

London-based Cresco Capital, an owner-managed real estate investor and developer, said it had raised capital commitments of €110m from large European and Asian family offices in the first close of its first German real estate development fund over the last six months. It expects to raise up to €200m by the end of the year.

Multi family office LJ Partnership has partnered with Cresco for its German activities and is a cornerstone investor in the new fund, the Cresco Capital Group Fund 1, Cresco said.

Historically Cresco has invested through single asset special purpose vehicles, so the fund represents a new departure. However, 'operationally intensive' properties will remain the focus, with German landmark buildings being typical of the company's investments to date.

According to Daniel Schuldig, Cresco's co-managing partner: "The fundraising has proved a big success and we expect to close the fund by the end of this year with capital commitments totalling €200 mln. Our investment pipeline is very active and the fund will enable us to invest in projects even more quickly and flexibly, allowing us to develop market leadership for our micro apartment platform."

The fund’s investment focus will be on micro apartments in all major German cities as well as attractive university cities, along with investing opportunistically in other property areas.

"In addition to micro apartments, we will also continue to evaluate targeted investment opportunities in other areas, particularly properties that are suitable for hotel developments," said Alexander Bürk, also co-managing partner.

The Cresco Capital Group Fund 1 has already made its first investment, buying a 12,000 sqm property close to the Riedberg university campus in Frankfurt am Main. The seller was Alstria Office REIT, which had valued the property in its 2015 books at €12.8m. The property includes a fully-let office building as well as land reserves for the development of around 250 micro apartments for students and 1,300 sqm of retail spaces. The project, with a total investment volume of €40m, is expected to be completed by the third quarter of 2017.

Since its foundation in 2006, Cresco has invested more than €700m in property across Germany. Now managed by co-owners Alexander Bürk and Daniel Schuldig, Cresco's investments have included hotel developments – such as the hip and fashionable Soho House in Berlin – retail properties, offices and residential estates. The company, with offices in Berlin, London, Luxembourg and Guernsey, teamed up with LJ Partnership in 2013 to develop a platform focused on the development and operation of micro apartments.

The platform is primarily aimed at students and is seeing high demand in German major cities and university towns. Since then, and in addition to the fund, LJ Partnership’s clients and shareholders have committed €100m in equity capital to ongoing developments.

Over the past ten years, the number of university students in Germany has risen from around 2 million in the winter semester 2006/2007 to around 2.8 million in the winter semester 2015/2016, with living space in dormitories available for less than 10% of the student population. Available residential housing is a rare commodity in inner city locations close to university campuses and in many cases apartments are not customized for the requirements of students, or mobile professionals.