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The largest real estate company in Germany announced on Thursday that Vonovia had reached an agreement to sell a small portion of its Suedewo residential property to American investor Apollo for 1 billion euros ($1.10 billion). The deal could send a message to the faltering German real estate market, where there haven't been many significant sales in recent months due to high interest rates and declining home values. The deal values the Suedewo portfolio in Baden-Wuerttemberg in the southwest at 3.3 billion euros, which is less than 5% less than Suedewo's fair value as of December 31, according to Vonovia. The German company, which will continue to manage the portfolio of more than 21,000 residential units, acknowledged that it was under no duty to exercise the long-term buy-back option, which has an internal rate of return (IRR) of 6.95% to 8.30%, including dividends. With the money received, Vonovia will produce around half of the 2 billion euros in free cash flow from asset sales that were anticipated. Not the big bang, and sold 5% below recent fair value, but should be viewed as a first step in the right direction, a local dealer said in response to the news. At 07:33 GMT, Vonovia's shares climbed 2.6% to the top of Germany's blue chip index. The group planned to sell 13 billion euro worth of properties during the summer in order to ensure access to finance in the middle of the real estate market turmoil.