Hong Kong-based private equity real estate firm Gaw Capital Partners has teamed up with Zug-based investment manager Partners Group for the $928 million purchase of Pacific Century Place in Beijing.
It was the biggest single asset transaction by a foreign real estate private equity fund in China to date, according to a Gaw statement.
The seller was Pacific Century Premium Developments, a real estate unit of Hong Kong-listed communications technology company PCCW, which intends to use the proceeds of the sale to repay debt. The deal is still subject to regulatory approvals, but Pacific Century will pay a $100 million breakup fee if the agreement is terminated.
The capital for the deal came from Gaw’s $1 billion Gateway Real Estate Fund IV, which is now 50 percent invested.
Though neither firm would comment on financial details, Partners Group is understood to be a minority investor in the deal, as well as an investor in Fund IV. Its share of the capital came from several of its global and regional real estate funds. The purchase price has been met with 50 percent gearing.
The 1.8 million square foot mixed-use property comprises two office towers, two serviced apartment towers and a shopping mall. Connected directly to Beijing’s subway system, Pacific Century Place is located on the city’s third ring road and between the central business district and the Lufthansa District, with quick access to the Beijing Airport.
“This is a rare opportunity to be able to acquire such a large cash flow asset in a prime and irreplaceable area in Beijing. We believe this type of asset will continue to outperform,” Kenneth Gaw, president and co-founder of Gaw Capital, said. “Its diverse cash flow stream with retail, office, and residential elements provides excellent downside protection.”
Gaw has invested in several other buildings in the same area of Beijing before, including Taikoo Li in Sanlitun, Hotel G Beijing and Embassy House. As the operating partner in the joint investment, Gaw is hoping to bring “active asset management” to the property, particularly in the retail portion, which has been empty for almost 2 years. The firm’s plan is to renovate and reposition the whole retail section, as well as implement some upgrades to the apartments and office towers.
“[This project will] also provide us an opportunity to showcase what we’re known best in the market for – to bring value-add to properties through creative yet prudent asset management,” added Humbert Pang, managing principal and head of China for Gaw.
This is also the second time Partners Group has teamed up with Gaw Capital for a property deal, with the first being the HK$2.4 billion (€224 million; $310 million) purchase of the Novotel Nathan Road hotel in Hong Kong in August 2012.
“[The Pacific Century investment] offers the chance to add real value to the investment through active asset management and reconfiguration of the asset,” Bastian Wolff, head of Asian real estate for Partners Group, told PERE. “As such, it was a compelling opportunity to partner with Gaw Capital for the second time and a straightforward fit with our investment strategy.”
Gaw Capital, which manages approximately $8.5 billion of assets, has also been particularly aggressive in expanding outside of China over the past year, launching a US arm and most recently making an acquisition in Japan.
Partners Group currently has approximately €30 billion under management globally, €4 billion of which is in real estate.