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Gaw Capital hits $1bn hard cap for Fund IV

In just a little under a year, the Hong Kong-based private equity real estate firm has closed one of the largest private equity real estate funds raised for China since the onset of the global financial crisis.

Gaw Capital Partners has held the long-anticipated final close for its $1 billion Gateway Real Estate IV fund, having hit its hard cap with commitments from approximately 20 investors worldwide.

PERE reported in late August that Gaw Capital had secured $933 million from investors, and was waiting on two more commitments. Among the fund’s investors are pension funds and sovereign wealth funds from around the world, with slightly more than half of Fund IV’s capital coming from investors new to the firm, and the other half understood to have been provided by investors re-upping from its previous funds.

In a significant departure from its previous funds, it is understood that the fund’s investor base was approximately 40 percent from the Asia Pacific region, 30 percent from the US, and 30 percent from Europe. In the past, about 60 percent of Gaw’s investors have been from the US.

It is understood that such was the appetite for this vehicle among investors, Gaw Capital was able to take its own $25 million GP commitment out of its fundraising count in order to include certain investors and yet remain within its $1 billion hard cap. It is understood that Gaw Capital will still co-invest that $25 million in the fund’s deals.

While $1 billion was the hard cap for the fund itself, Gaw Capital was also able to corral capital for co-investments that have brought the total capital in or connected to this vehicle closer to $1.2 billion. All of the fund’s investments so far are understood to have involved varying amounts of co-investment capital.

Gaw Capital has completed four deals for Gateway IV thus far and is thought to be in advanced stages on two more. With the co-investment money factored into the deals, about one third of the fund’s currently committed capital is now invested. One prominent deal of the fund was a $262 million purchase of Cross Tower from Singapore-based real estate firm Ascendas.

Gaw is targeting investments in existing commercial properties, but also has a 30 percent maximum allocation to new developments which is expected to include residential. The risk profiles of many of the properties would be considered value-added or core-plus in nature. Ultimately, Gaw Capital is targeting 20 percent IRRs and a 2x equity multiple from the fund’s investments, in common with many China-focused real estate funds.

The final close makes Gateway IV the second largest private equity real estate fund raised for China this year, following the $1.4 billion final close of Mapletree China Opportunity Fund II by the Singapore-based property company.

Now that Gateway IV is closed, Gaw is understood to be focusing its efforts on a $300 million to $500 million US fund, which it is seeking to launch at some point this quarter. Similar to Gaw Capital’s strategy in China, the US fund is expected to facilitate investments in properties that can be repositioned or redeveloped, and will be managed by a newly formed entity called Gaw Capital US.