Hong Kong-based private equity real estate firm Gaw Capital Partners has held a third closing for its fourth private equity real estate fund at approximately $780 million, putting the firm on course to raise its biggest fund so far.
The raising for Gateway Real Estate IV further demonstrates how international institutional investors are backing the current wave of commingled opportunistic real estate funds for China. Gaw Capital’s closing follows closely a final closing held by Hong Kong neighbor CITIC Capital, which announced on Monday that it had corralled $683 million for its CITIC Capital China Retail Properties Investment Fund. Last week, PERE revealed that InfraRed Capital Partners, the private equity real estate and infrastructure firm spun out from HSBC bank, held a first closing of $200 million for its second opportunity fund with Chinese real estate and textiles business Nan Fung for their NF China Real Estate Fund II.
Gaw’s fundraising is now expected to reach its original $1 billion target at a final closing to be held towards the end of the summer. If achieved, the fund would have raised all its equity within one year of marketing, an indicator that investors are moving quicker than before to commit capital to select investment managers. Gaw raised the first $140 million for the fund in November and added a further $200 million in March.
Investors in the eight-year fund include sovereign wealth funds and pension plans from around the world. They are understood to have been attracted partly by Gaw’s seed assets for the fund, all of which are completed and have some visibility in terms of income. While development also is expected to be part of the investment thesis, it is thought to reflect no more than about 30 percent of the portfolio once all the capital is deployed.
To date, the fund has been invested into four assets and a fifth investment is close to completing. Combined, they represent about $400 million of the fund’s equity, although the firm is understood to be offering co-investment opportunities to investors on certain of these assets, meaning that equity total could rise again.
Gaw is targeting investments in existing commercial properties, including offices and retail properties as well as hotels that need repositioning or redevelopment. The new development proportion of its strategy is expected to be residential. In terms of risk profiles, many of the properties would be considered value-added, although some could be profiled as core-plus in nature. Ultimately, Gaw is targeting 20 percent IRRs and a 2x equity multiple from the fund’s investments, in common with many China-focused real estate funds.
Gaw closed on $423 million for its third fund in 2011 during a particular tough capital-raising environment. The firm raised $800 million for its second fund in 2007, before the global financial crisis started, and $199 million for its first in 2005, shortly after founders Goodwin and Kenny Gaw formed the business.
Gaw Capital declined to comment.