MUNICH-Deutsche Bank's alternative assets group Rreef is launching a German Special Fund to target office and retail income-driven core assets around Europe, especially in UK, France and Germany, says its new Managing Director Georg Allendorf.

He told PFE the new European Core Recovery Fund is aiming for €250 million of equity, and will continue to take institutional commitments at least through 2010. Leverage legal limit is 50% but the fund is unlikely to seek debt financing above 40% or 45% so that final target AUM will be somewhere between €400 million and €500 million. "We will be investing in 2010 and 2011," Allendorf says. "German Special Funds don't really have a cut-off; you can raise commitments indefinitely, so actually we are cutting ourselves short." Target investors are German institutions, including pension funds and foundations.

"The preferred asset profile is core investments...prime assets in major locations throughout Europe--very traditional," Allendorf tells PFE. "We aim to have the majority of fund returns coming from income. We are not really value-appreciation seekers but believe this is a good time to acquire very strong assets that offer substantial cash-flow."

The fund will also have some allocation to southern Europe, and to the Nordics, but Rreef will not be providing seed assets. "In our opinion it has been proven that seeding a fund with assets might have been a good idea a couple of years ago, but it's not what the clients seek at the moment," he says. The first equity commitment is expected to be signed this year or early next since interest has been lively.

"We find interest in a product like this because everyone believes we are in a cyclical industry and expects some upturn in coming years," he says. Some commitments are likely from institutions that have not invested in real estate before.

Allendorf, who in autumn succeeded Holger Naumann at the head of Rreef Germany after the latter transferred to Deutche's DWS funds manager, is also vice-chairman of the INREV European Association for Investors in Non-listed Real Estate Vehicles. German special funds in the past have generally targeted returns for investors of 6% to 7%.