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Gaw Capital raises first $700m for Fund V – Exclusive

The Hong Kong-based private equity real estate firm already has deals lined up for approximately one-third of the fund’s capital raised so far.

Gaw Capital Partners, the Hong Kong-based private equity real estate firm, has raised more than half the money it is targeting for the latest fund in its flagship series, PERE has learned.

The firm declined to comment but it is understood to have raised approximately $700 million for the first closing of its Gaw Capital Real Estate Fund V, which happened this week. The capital for the first closing is believed to have come from institutional investors including sovereign wealth and pension funds.

Gaw Capital is targeting a total capital raise of $1.3 billion by the time it holds a final closing in the summer. The target is slightly lower than the $1.5 billion it originally aimed for. Following talks with investors, it is thought the firm agreed to lower the fund target with a view to potentially increasing the amount of co-investment available for Fund V’s larger investors.

Previously, large co-investments have been something of a common fund feature for Gaw Capital and one way the firm has differentiated its offering from some of its larger rivals in Asia. The firm raised more than $1 billion for its fourth fund, Gateway Real Estate IV, but ultimately deployed about $1.9 billion including various side-car funds and co-investment arrangements.

As such, sources say Fund V could ultimately account for up to twice as much equity capital as will be committed to the actual fund, theoretically giving it some $2.6 billion to deploy.

Investing at this scale has put Gaw Capital among the largest real estate investment managers in Asia, alongside Asian groups like PAG and Alpha Investment Partners, as well as the Asian arms of the sector’s global managers like Blackstone, BlackRock and LaSalle Investment Management.

None of the capital raised for Fund V has been invested yet. However PERE understands that the firm has a pipeline of deals readied for the fund that would account for about a third of the capital raised to date.

In a further change following initial discussions, and in another sign that more investors are adopting a contrarian stance on China, Gaw Capital has decided to invest at least 70 percent of its Fund V’s capital in the country. It originally planned to deploy as much as 50 percent of the fund’s capital to other Asian markets but has now adopted the lower allocation with a view to taking advantage of cyclically lower pricing in China at the moment.

Although Gaw Capital has grown its reputation on the back of its Chinese deals, prior funds also have had a non-China allocation. Fund IV saw 20 percent deployed in markets including Vietnam, Korea and Japan.

In a connected fundraise, PERE also understands that Gaw Capital is raising an Asia Pacific hospitality-focused vehicle which will be invested alongside Fund V. For this side-fund, the firm will target hotel assets across the region on behalf of fund investors. It is expected that the vehicle will attract as much as $250 million.

The firm has constructed side-funds in the past, such as a $300 million pot raised last June specifically for logistics deals in China. The capital included both $80 million from Fund IV and $220 million in extra commitments from that fund’s investors.

Gaw Capital declined to comment.