Gaw Capital Announces $412M Close of Third US Value-Add Fund

Gaw Capital has closed its third US value-add real estate fund with total commitments reaching a hard cap size of $412 million, the Hong Kong-based private equity shop announced. The Gaw Capital US Fund III will mainly target real estate opportunities on the west coast, including Southern California, the San Francisco Bay Area and the Pacific Northwest.

The vehicle will focus on “creative office and hospitality assets,” according to a statement, along with platform investments that promise attractive risk-adjusted returns. Gaw, which launched the fund last November with a registered goal of $350 million, said the vehicle attracted commitments from new investors as well as backers of the firm’s previous funds.

The limited partner base of the new vehicle is about 45 percent US-based and 55 percent international. Among the fund’s major participants, the Ohio Bureau of Workers Compensation Fund has invested $50 million, while the San Francisco Employees Retirement System has chipped in $50 million more, according to media accounts. South Korean institutional investors are said to have committed another $180 million in investment.

Gaw Sees Hotbed of Opportunities in the West Coast

“The US west coast continues to be a hive of youthful entrepreneurial spirit and innovation, creating an abundance of long-term redevelopment and repositioning opportunities in the local real estate market,” commented Goodwin Gaw, chairman and managing principal of the firm in the statement.

“Gaw Capital’s reputation for identifying niche trends within emerging real estate segments, and its ability to revitalize underutilized properties, not only delivers healthy and profitable returns for investors, but fulfils an appetite among local entrepreneurs for out-of-the-box concepts for their flexible and creative workspaces,” he added.

Gaw has about 30 professionals based in the US, with most of them in Los Angeles and in 2015 the firm made the second biggest acquisition ever in the Pacific Northwest when it led the $725 million acquisition of Seattle’s Columbia Center. Previous media accounts have indicated that San Francisco and Seattle would be top acquisition targets for the latest vehicle.

Hong Kong PE House Builds on US Track Record

Gaw’s first product for the US market, US Fund I, reached a final close of $110 million in 2012 and is projected to realise a 28 percent internal rate of return, according to the firm. The maiden fund’s successful investments have included Soho House, a boutique hotel and members’ club in Chicago, in which Gaw owns an undisclosed stake.

Gaw partnered with local developers to buy and refurbish the former warehouse in the city’s Fulton Market area, and last month teamed up with China’s Sino-Ocean Land and Huarong International Financial Holdings to buy out the property for $95 million. The fund’s other deals have included Courtyard Marriott in Sacramento, California and One Kansas City Place, a 42-storey office tower that is the tallest building in Missouri.

The firm run by Hong Kong’s Gaw family had $2.14 billion of assets under management as of year-end 2017. Value-add enthusiast Goodwin Gaw has been investing in the US since 1995, when he bought the Hollywood Roosevelt Hotel, a distressed heritage property that he renovated, and subsequently founded Downtown Properties to invest in hotel, office and golf course properties across the country.