Blueprint: Gaw Capital’s proptech success, US stimulus, Brookfield’s zero-interest windfall

Gaw-backed proptech firm goes public; US multifamily's stimulus problem; Nuveen's all-remote fundraising quarter; and more in today's briefing, exclusively for our valued subscribers.

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He said it

“There’s no precedent for the fiscal and monetary stimulus that we’re seeing. It’s 10 times the size of the 2008 crisis response. Initially, the focus has been on stability, recovery and then, more long-term – I think this will happen mostly next year – expect there to be reform”

Ken Mehlman, partner and co-head of KKR Global Impact, on US stimulus efforts during a webinar hosted by the firm last week

What’s new?

Proptech gone public

There is light at the end of the tunnel for real estate tech investors. Last week, Gaw Capital-backed Beike, a Beijing-based housing transactions platform, raised $2.1 billion from its debut on the New York Stock Exchange. Despite rising tensions between the countries, it was the biggest US listing by a Chinese company in two years. It was also the first proptech company financed by Gaw to go public, according to the firm’s managing principal Humber Pang. The Hong Kong-based Gaw has been active in the space since at least 2016.

Earlier this month, the online mortgage juggernaut Rocket Companies also went public, raising $1.8 billion. These two flotations paint a rosier picture for the proptech space than what market participants were left with last year, after WeWork’s failed IPO left the one-time market leader on life support.

Training wheels are off

Multifamily managers and investors, brace yourselves for a bumpy couple of months. In the US, the property type is about to see if it can run without the support of federal stimulus. Critically, a program that paid the unemployed $600 a week ended last month. Congress is on its August recess, meaning a replacement package is likely to remain on hold until late September at the earliest. Making matters worse for landlords: widespread eviction moratoriums prevent them from acting in cases of non-payments, which are already rising, even among renters not impacted by the pandemic. See our full coverage of this topic here.

No interest, no problem

Managers currently fundraising have much to gain from the budding economic crisis. A global zero-interest rate environment has driven investors to real assets as fixed-income substitutes, Brookfield chief executive Bruce Flatt said during the firm’s second quarter earnings call. The Toronto-based  manager raised $23 billion across asset classes last quarter, including €725 million for Brookfield Premier Real Estate Partners Europe. This environment also helps valuations. Flatt said he is starting to see real estate and infrastructure asset bids reach higher multiples than pre-covid.

Data snapshot

On the mend

Tracking the number of confidentiality agreements signed by prospective investors, CBRE finds investment interest has picked up during the summer.

Trending topics

Distress in China

Pandemic-driven distress is continuing to impact pricing in China. The latest example is the mall portion of Shanghai’s Crystal Galleria complex, which Hong Kong-based Phoenix Property Investors and Korea’s National Pension Service are looking to sell for $860 million. A few years ago, the property was valued at $1 billion (see Bloomberg’s coverage here). Already this year, Phoenix has had to refinance an office complex in Shanghai because of covid-19 disruption (see a public disclosure from its partner in the deal here). More broadly, the value of deals in China declined 34 percent between the first and second quarters, according to Cushman & Wakefield.

Remote control

Investor comfort with remote due diligence has evolved yet again. Last quarter, Nuveen Real Estate raised $327 million for its core US Cities Multifamily Fund – all from institutions new to the firm, Wendy Pryce, a managing director who oversees fundraising, told PERE. Meetings were conducted by phone or video conference, while drone footage and Google Maps stood in for site visits. Although the fund’s open-end structure may have put unfamiliar investors at greater ease, the closing is a testament to what can be done virtually.

Investor watch

Retail resilience

The right retail strategy will still secure investor capital. Singaporean sovereign wealth fund GIC has partnered with Australian real estate firm Charter Hall to pay A$682million ($492 million; €414 million) for a minority stake in an Ampol petrol (gasoline) station property trust. The portfolio includes 203 Australian convenience retail assets, and GIC will reportedly own 95 percent of the joint venture. Earlier in the pandemic, GIC backed a $300 million fund launched by ASX-listed manager Primewest to buy Australian neighborhood shopping centers.

This week’s LP meetings

Tuesday, August 18

Wednesday, August 19

Thursday, August 20

Friday, August 21

Today’s letter was prepared by Kyle Campbell with Arshiya Khullar and Christie Ou contributing.

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