A prime city centre development site that has sat idle for almost two years after falling victim to the credit crunch could soon be back on track after it emerged that a German fund was on the verge of investing in the scheme.

According to industry sources, the Frankfurt-based Union Investment Group is set to sign a deal with Ballymore to complete the second phase of the Snowhill scheme, which ground to a halt after Anglo Irish Bank pulled its funding as the Irish economy began to falter. Savills, which had been instructed to market the scheme, had been seeking offers of about £135.1m, reflecting a yield of 6.5 per cent.

The first phase of the scheme, which is now let to KPMG and Barclays, was acquired by Commerz Real AG for the German hausInvest europa fund earlier this year for £113 million.

Ballymore has been under pressure to find a new funding partner for the 300,000 sq ft second phase of the development as it attempts to honour a 20-year pre-let it has signed with Birmingham law firm Wragge & Co for 183,599 sq ft. The agreement means the law firm can walk away from the deal if the building is not complete by the beginning of 2013.

The status of a third phase to the scheme, which has planning permission for apartments and a luxury hotel, remains unclear although any residential development in the city looks likely to remain on hold for the forseeable future while Birmingham’s apartment market continues to be depressed.

Ian Metcalfe, managing partner at Wragge & Co, reiterated the firm’s commitment to the project. He said: “Two Snowhill promises to be a superb, state-of-the-art space for Wragge & Co’s global headquarters and we are looking forward to moving into the new building.”

The potential move by the German fund manager is the latest in a significant run of foreign interest in Birmingham as investors look for better value outside of London.

As well as the acquisition of One Snowhill by Commerz Real AG, this year also saw the acquisition of a large chunk of Brindleyplace in a joint venture between US property giant Hines and Moorfield.

In 2009 Egyptian investors paid £60 million to acquire 125 Colmore Row through a different German fund manager.

Earlier this week Union Investment acquired the Equinox building in Glasgow for its open-ended real estate fund Unilmmo:Deutschland – it’s first UK office investment outside London although it had previously invested in hotels in Manchester and Stanstead.

Karl-Joseph Hermanns-Engel, a member of the management board of Union Investment Real Estate, said the Glasgow deal represented a move into prime UK regional markets “that we’ve been monitoring for some time now as part of our core strategy and in order to diversify the fund”.

Ballymore and Union Investment declined to comment on the developments.

The Snowhill scheme first hit difficulties after Anglo Irish was nationalised by the Irish government in January last year and became one of six Irish banks set to be bailed out by the National Asset Management Agency. A similar fate befell another city development – Connaught Square in Digbeth – whose Irish backers pulled funding, although in its case, construction had not yet started.

Naus Group, another Irish developer, had planned to build a £150 million mixed use scheme opposite Digbeth coach station, but was forced to call in the administrators as a result of a funding decision by Allied Irish Bank.

However, the administrators have now applied for a new planning permission.