Gaw Capital holds first close on US fund

The Hong Kong-based firm has raised approximately half of its target for its first institutional vehicle targeting the country.

Gaw Capital Partners has collected about $140 million in commitments for its debut US institutional fund, Gaw Capital US Value Add Fund, according to sources familiar with the matter. Gaw declined to comment, but PERE understands that the firm is anticipating a final close for the vehicle, which has a $300 million target and $500 million hard cap, by early next year, as well as an interim close between the first and final closes.

Four limited partners participated in the first close, including the San Francisco Employees’ Retirement System (SFERS), which committed up to $50 million to the vehicle in May. Two Asian institutional investors and a group of Asian super-high-net-worth family offices rounded out the fund’s initial base of backers, according to sources familiar with the fund.

The fund will pursue the niche strategies of ‘creative office’ and ‘creative hospitality’, which will call for redeveloping and repositioning mismanaged and undercapitalized assets in gateway cities such as Boston, Los Angeles, New York, San Francisco and Washington, DC, as well as secondary markets that include Austin, Denver, Nashville, Seattle, Portland, Oregon and Raleigh-Durham, North Carolina, according to SFERS documents. Gaw is targeting a 13 percent to 15 percent net internal rate of return and a 2x equity multiple for the vehicle, the documents said.

Creative office will involve the warehouse-to-office conversion of properties in up-and-coming areas of US cities, with the goal of tenanting these buildings with firms in creative industries such as technology and media. Meanwhile, creative hospitality will entail upgrading tired and outdated hotels near major US university campuses. With the first close of its US fund, Gaw now will seed the vehicle with a $40 million investment that represents the fund’s ownership stake in a creative hospitality platform involving multiple assets and partners.

Gaw’s US fund represents the firm’s first institutional capital raise in the world’s largest real estate market. However, founder Goodwin Gaw has been investing in the US since 1991 through Downtown Properties, a Los Angeles-based associate firm that he founded prior to establishing Gaw Capital. Gaw’s first commingled US capital raise was through a Downtown Properties club vehicle that comprised a number of Asian institutional investors, one of which also was a limited partner in the first close of the US fund.

Last year, the firm officially launched its US business, hiring New Jersey Division of Investment director Tim Walsh to lead the new entity as president and chief operating officer. With Downtown Properties now serving as Gaw USA’s asset management arm, the firm has a staff of approximately 25 people stateside.