Gaw Capital eats into Fund V equity buying $2.9bn HK retail portfolio

Private equity real estate firm Gaw Capital Partners led a consortium of investors in acquiring a retail portfolio comprising 17 shopping centers in Hong Kong from listed-property company LinkREIT for  HK$23 billion ($2.95 billion; €2.49 billion).

The consortium consisted of Gaw and some limited partner co-investors, as well as the private equity arm of New York bank Goldman Sachs, Goldman Sachs Principal Investment Area, and Chinese investment firm China Great Wall Asset Management as minority investors, according to a source with knowledge of the deal.

Gaw used equity from its firth opportunity fund, Gateway Real Estate Fund V, which closed on $1.3 billion earlier this year alongside $500 million in co-investment capital. Both the fund and co-investment capital are expected to be called for this deal. For the fund, the firm is aiming for a high teens to low 20s IRR and 2x equity multiple.

For LinkREIT, the sale is a 52 percent premium to the appraised value of the properties and yielded a net disposal gain of HK$7.4 billion, the firm said in a statement late Tuesday.

The gross floor area of the portfolio totals 2.2 million square feet of retail space and comes with over 8,000 parking spaces that are connected to highly-convenient transport links. The properties are across Kowloon and the New Territories, areas which Gaw said are attractive destinations for retailers and hubs of community life for residents.

“We and our partners strongly believe in Hong Kong’s future, and believe these malls, which Link REIT has done an excellent job in upgrading and maintaining, will continue to serve important functions in the community,” Goodwin Gaw, chairman and managing principal of Gaw Capital Partners, said in a statement.

“We hope to utilize our experience to evolve these malls into refreshed and renewed centers of local life. To be successful, we will need the support of the community, and we look forward to working with them to understand the gaps that could be filled and how we can support them to make their neighborhoods better homes.”

Gaw Capital has raised equity of $8.6 billion since 2005 and held $13 billion under management as of Q2 2017. The firm has raised five commingled funds targeting the Greater China and Asia Pacific region since its inception. Besides its main Gateway fund series, in addition to managing opportunistic funds in Vietnam and the US along with a Pan-Asia hospitality fund, the firm also provides services for separate account direct investments globally.