Next week, Hong Kong’s Gaw Capital Partners is slated to bring the curtain down on one of the most successful capital hauls the Chinese private real estate market has ever seen. According to sources, the firm that was started in 2005 by brothers Goodwin and Kenneth Gaw will have amassed approximately $1.2 billion for its Gateway Real Estate IV opportunity fund. We even hear the firm had to turn away tardy commitments totaling $300 million to stay faithful to its hard cap.
Without a doubt, Gaw Capital is successfully riding the crest of a wave of renewed enthusiasm among global institutions for China’s bricks and mortar. Still, within the corridors of the firm’s Hong Kong headquarters, there’s a sense of trepidation stemming from events 8,000 miles away in the very country that has fuelled much of its investing activities.
Late last Friday, news broke of Gaw Capital’s appointment of Timothy Walsh, the director of New Jersey’s Division of Investment (NJDOI), to lead Gaw North America – the working title for an enhanced version of the firm’s US affiliate, Downtown Properties. On the back of this hire, the firm is drawing up plans for a fundraising to acquire properties in the US opportunistically.
But having just completed its biggest equity haul to date for China, there is some anxiety within the Gaw Capital camp to downplay its US news in case it provokes consternation among Gateway IV investors that the firm – and Goodwin Gaw in particular – would be unduly distracted stateside while putting their capital to work. That is a projection that the firm already has tried to dispel. Early in the Gateway IV fundraising, it opted to reduce its allocation to Asian markets outside of China from 30 percent of total capital to 20 percent in a deliberate attempt to underscore its sinocentrism.
Investors in Gateway IV should not worry. If anything, from September 1, when Walsh starts handing out his president and chief operating officer business cards for the first time from an office in Chicago, they can rest assured their manager has taken a significant step to separate its US activities from its China activities. Indeed, Walsh takes the wheel of the approximately 25-strong platform in Los Angeles, where Downtown Properties is based, precisely so Goodwin Gaw doesn’t have to.
What some observers perhaps do not realize is that Gaw’s origins actually are with Downtown, the current iteration of its US business. Born in San Francisco and educated in Pennsylvania, Goodwin Gaw started plying his trade on the West Coast back in the mid-1990s. From a $4 million equity investment in the famous Roosevelt Hotel in Los Angeles, Downtown has grown into a $1.5 billion empire today, with assets held on behalf of a club fund and a collection of separate accounts. In other words, for as long as there has been a Gaw Capital, there has been a Downtown Properties. The difference is that now its chairman no longer carries quite the same weight of responsibility for the business he once did, which frees him up to focus more on China.
Further, in the first instance, Walsh’s mandate is to oversee the existing portfolio and assess the staffing requirements. Growth is in the cards, but expect some time to pass before a fund sees the light of day. In the meantime, Goodwin Gaw and his altogether bigger Gaw Capital will do what it is best known for: taking down opportunistic deals in China.