Gaw Capital Partners will largely avoid overheated cities in China with its third real estate opportunity fund, after closing the vehicle on $373.5 million of equity.
The Hong Kong-based firm said it closed Gateway China Real Estate Fund III this week with commitments from US endowments and pension funds, sovereign wealth funds, multi-family offices and an increased number of European investors. The vehicle was launched in 2008 with an original target of $950 million, according to placement documents seen by PERE.
Managing principal Christina Gaw said in a statement fundraising had been tough over the past 18 months but that the firm’s focus on greater China – as opposed to tier one cities – was attractive.
Admitting the fund would be “steering clear” of cities such as Beijing, Shanghai and Guangzhou, Christina Gaw explained the firm was “earmarking” emerging economic powerhouses such as Dalian, Jiangsu Province and Chengdu where “government policies are much more accommodating, even in today's tightening environment”.
She also told Asian Investor the situation for tier one cities in China was “definitely worrisome” although the firm had “seen some corrections and vendors cutting prices to sell developments”.
Humbert Pang, managing principal and head of the firm’s China operation, said in the statement the focus on second and third-tier cities was to take advantage of China’s “urbanisation programmes and recent policy initiatives to stimulate domestic demand and growth”. Gaw Capital would continue to focus on the residential sector but also expand into retail, office and hospitality, he added.
The eight-year fund is targeting returns in excess of 20 percent, with a leveraged loan-to-value ratio of 50 percent or less. The bulk of the vehicle, around 80 percent, will be invested in greater China, while up to 20 percent will target Asia, particularly Southeast Asia.
Gaw, founded in 2005 by Goodwin Gaw and Kenneth Gaw, raised $198.9 million in 2005 for Gateway China Fund I and reportedly raised $800 million in 2007 for Gateway Capital Real Estate Fund II.