ASIA NEWS: Beyond China’s walls

In March, Hong Kong-based Gaw Capital Partners held its annual investor forum in Vietnam’s largest metropolis, Ho Chi Minh City. According to Christina Gaw, the firm’s managing principal and head of capital markets, the plan was to introduce some of its investors to the city and, importantly, the notion of Gaw Capital potentially having real estate exposure there.

“We would like investors to be more familiar with the country as it has strong links to China’s growth,” Gaw told PERE. By her reckoning, the real estate markets of Vietnam and other Southeast Asia countries are directly benefitting from numerous Chinese manufacturing companies relocating from Greater China. “In fact, we have a Vietnam deal going on right now,” she added, declining to describe the investment further.

To date, most observers link the name Gaw and international property to Downtown Properties, the US-based private real estate business started by Christina’s brother and Gaw Capital co-founder Goodwin Gaw. Via that company, the Gaws have invested in large offices in the US on a deal-by-deal basis alongside institutional investors from places like Korea. Outside of the US, Downtown Properties has looked at office investments in other markets as well, such as the UK and Singapore.

Does this mean there is willpower to break the mould for the traditionally China-focused Gaw Capital? “Yes, definitely,” answered Gaw, but she said the firm’s primary focus would continue to be on Greater China investments, for which it has managed to raise more than $1.4 billion through its three Gateway opportunity funds.

Approaching the pre-requisite 85 percent hurdle on deployed capital for its third fund, PERE understands that Gaw Capital is expected to send out a private placement memorandum for its fourth fund in the series this month. Seeking up to a further $1 billion from investors – potentially split $800 million for the fund and $200 million for sidecar co-investment vehicles – Gateway Real Estate Fund IV is slated to be marketed to investors old and new.

As with the Vietnam deal, Gaw would not comment on the firm’s fundraising plans. However, the new fund is understood to allow for approximately 30 percent of any capital raised to be invested outside of Greater China, particularly in Southeast Asia.

Gaw stated that the firm’s strategy outside of China historically has come with geographical restrictions. “We would not do deals in India or Australia, for instance,” she said. “Our outside focus has been Southeast Asia, and we have strong links to Bangkok in Thailand.”

Previous Gateway funds have had a provision allowing for ex-China investments, Gaw noted, but just one outlay – in The Philippines – has actually taken place to date. That was on behalf of Gateway Real Estate Fund II, which closed on $800 million in 2007.

In terms of Gaw Capital’s current China strategy, affordable housing is expected to figure prominently as would retail, Gaw noted. “Generally speaking, we still believe the long-term story for China is about tapping into middle income growth,” she said. “Obviously, urbanisation remains the key. We’re talking about affordable housing in Tier II and Tier III cities, as well as retail. These remain the centres of attention for us.”

At press time, Gaw Capital was understood to be close to taking its PPM on a tour of prospective investors. Those that attended its investor forum in Ho Chi Minh City will likely already know that, while the firm’s principal focus remains Greater China, its horizons nonetheless stretch beyond the country’s walls.