Gaw Capital sets $8bn Japan target

Hong Kong-headquartered private equity real estate firm Gaw Capital Partners plans to double its exposure in Japan in the three years.

Gaw Capital currently manages $3.7 billion of assets in Japan but plans to increase that to $8 billion within the next three years, PERE has been told by a senior executive at the firm.

Last week, it completed the purchase of its first logistics portfolio in the country from New York sector-heavyweight manager Blackstone. The portfolio comprised seven fully let assets across Greater Tokyo.

Gaw Capital declined to reveal the sale price but said the acquisition was made for the firm’s flagship opportunistic fund Gateway Real Estate Fund VII. PERE also learned the deal has a loan to value gearing ratio of 70 percent.

Isabella Lo, managing director and head of Japan at Gaw Capital, told PERE the risk and return profile for industrial real estate in Japan was attractive.

“Over the past nine years in Japan, we have been buying assets that look like core investments to investors, but we actually ended up achieving opportunistic returns,” Lo explained. For example, the firm saw opportunities to unlock value in logistics properties by carrying out a series of value adding strategies including cold storage conversions amid other types of proactive asset management initiatives and improving their ESG credentials.

Gaw Capital first entered the Japan market in 2014 through its investment in the Hyatt Regency Osaka hotel. In the past 12 months, the firm has participated in several landmark transactions. Earlier this year, it partnered with US manager Invesco Real Estate to complete the first privatization of a J-REIT – the $3 billion Invesco Office J-REIT.

Shortly after that, it acquired a residential portfolio of 32 assets in Japan on behalf of Middle Eastern sovereign wealth fund, Qatar Investment Authority. Currently, Gateway Real Estate Fund VII has about 30 percent of its capital allocated to Japan.

Lo said: “I think we have grown very quickly in Japan. Especially in 2021 when it was a relatively quiet market due to the pandemic, we actually did a lot of transactions. We completed almost $3 billion of transactions in 2021 and 2022 combined. We hope to keep that momentum going.”

Japan is currently one of the most attractive markets due to the favorable combination of a low interest rate, a healthy cash yield and a relatively cheap yen, according to Lo. “Also, from a geopolitical standpoint, Japan is still a relatively mature and stable market compared to, for example, other countries like China, which has more geopolitical risk at this moment.”

In the next few months, Gaw plans to add two to three new hires to its 14-people team in the Japan office to further fuel its expansion. “Right now, we have a separate account and our main fund that can invest in the country. We will continue to look for other products that we feel that could suit the market well depending on what our investors want to see,” she added.