Hong Kong-based private equity real estate giant Gaw Capital Partners is poised to take one of its biggest steps yet in its mission to become a global real estate investment management business with the launch of a pan-Asia opportunity fund.
PERE can reveal that the firm began soft marketing for Gaw Capital Real Estate Fund V in the last fortnight during which time it has proposed to prospective investors that as much as 50 percent of the vehicle’s capital be deployed into markets outside of China, the country where the firm made its name.
Gaw Capital already invests globally via separate accounts for affiliated businesses in Europe and the US. It has also raised capital for Gaw Capital US, a division focused solely on the US. However, it is the geographic expansion of its flagship opportunity fund series which is bound to catch the market’s attention as it was historically focused mainly on China.
Gaw Capital is aiming to raise $1.5 billion for Fund V, which would also be a record amount for the firm. That would mean as much as $750 million is deployed outside of China.
It is entitled to market the vehicle as it has now deployed more than 85 percent of the equity of its $1 billion Fund IV, which closed in 2013. That fund, which ultimately attracted closer to $1.6 billion including coinvestments, had a 20 percent allocation to non-China investments which, via four transactions, was fully utilized.
Indeed, the firm has steadily been building up its presence in other Asian markets thanks to such transactions. For instance, in May it purchased the $265 million Vietnam focused Indochina Land Holdings II fund from its investors in a deal that inherited it a team for future investments. Similarly, it has operated an office in Korea and last year made its first investment in the Korean market with the $200 million purchase of the Dongia 8 office tower in Seoul. Last year, the firm also made its first investment in Japan with the $30 million acquisition of the Hyatt Regency Osaka in Osaka City.
These three markets are expected to figure in Fund V’s investment strategy as will others, however Asia’s emerging markets like the Philippines, Indonesia and Myanmar are not expected to feature.
In another departure from the firm’s prior fund, Fund V is expected to generate high-teen IRR returns, rather than 20 percent plus, predominantly because of the lower risk profile being adopted in the Chinese market.
Gaw Capital declined comment.