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Investment manager Invesco Real Estate (IRE) has acquired a residential development in Frankfurt for around €62 mln, marking its first deal in the segment in Europe.

The acquisition of the 21-storey Westside Tower takes the form of a forward purchase and was made on behalf of a club of German institutional investors. The club has an initial target volume of €250 mln to invest in the residential sector.

The deal follows IRE’s appointment in April of John German as director of residential investments to spearhead the firm’s expansion into the residential sector across Europe.

Westside Tower is located in the Europaviertel development area to the west of Frankfurt. The complex will comprise around 23,250 m2 divided into 248 residential units as well as retail and other facilities such as a childcare facility, car parking and cellar storage units for each flat. Construction is scheduled for completion in Q4 2015.

The acquisition involves the forward purchase of a freehold site and the commitment to fund the development of the tower in partnership with Revitalis Real Estate.

Multi-family in the US
Commenting on the deal, German said: ‘We are delighted with this first step in providing the opportunity for our institutional investors to access this increasingly important sector. The Westside Tower project will produce an institutional grade, market-leading product in a location with proven investor and rental demand.’

Invesco is already active in the multi-family housing sector in the US and also has a strong presence in this space in Asia Pacific. ‘We believe the timing was therefore right to bring this considered investment philosophy to Europe,’ German said.

He noted that additional residential investment opportunities are currently being reviewed across Germany, including Dresden, Hamburg, Dusseldorf, Berlin and Freiburg, as well as the UK and the Netherlands.

Development projects
The intense focus on German residential assets among both domestic and foreign investors is leading some players to turn to development projects in anticipation of continuing strong demand for the sector.

Listed German investor Patrizia is involved in a major mixed-use project in Munich with Austria's CA Immo which will see the development of around 450 apartments over the next few years. The project is being financed by pbb Deutsche Pfandbriefbank.

In August, Aberdeen Asset Management announced it had acquired a residential development in Stuttgart from developer PDI Property Development for one of its special funds.

The Maybach Quartiere project is located to the north of the city and will provide around 9,500 m2 of space across 116 housing units in addition to 150 underground parking spaces. Project completion is scheduled for November 2013.

The Stuttgart project is the second deal between Aberdeen AM and PDI in the past year. In November 2012, Aberdeen purchased the Alex & Henrys residential project in Frankfurt from PDI.