Hong Kong’s Gaw Capital Partners, through a fund under its management and together with additional financial partners, has completed the acquisition of an Italian-themed outlet mall in southern China’s Guangdong province for an undisclosed amount, according to a statement on Friday.
In purchasing Florentia Village Guangzhou, a designer outlet in the city of Foshan, Gaw is acting as both buyer and seller in the transaction, with the private equity firm helmed by Goodwin Gaw having also been part of Silk Road Holdings, a joint venture with Nuveen, US apparel firm Waitex Group and Italy’s Fingen Group, which has developed a chain of Florentia Village outlets across China.
Gaw now says that it sees opportunities to expand and upgrade the existing 118,000 square metre (1.3 million square foot) as it sees potential for steady growth in China’s luxury goods market. Fingen, which also operates outlet malls in Europes, continues to hold a minority stake in the asset and will continue to manage the property.
“We are delighted to have completed the acquisition of Florentia Village Guangzhou outlet mall, which is a strong performing asset with unique expansion opportunity,” said Christina Gaw, managing principal and global head of capital markets at Gaw Capital, where she also co-chairs the firm’s alternative investments business.
Betting on China’s Love of Luxury
Originally opened in 2015, Florentia Village Guangzhou is now fully occupied according to Gaw’s statement, with the mall’s website listing tenants including upscale brands like Prada, Brooks Brothers, Calvin Klein, Coach and Hugo Boss, while also featuring mass market names like Levi’s, Nike, Columbia and Polo Ralph Lauren.
“The Florentia Village Guangzhou outlet mall is a unique and resilient segment of the retail sector, and being located in the Greater Bay Area, it will be able to ride on a domestic consumption-led recovery in the region,” said Imelda Tham, managing director for investment at Gaw Capital. “The strong rebound in footfall since the relaxation of measures has been remarkable and we hope to continue to attract more visitors by enhancing the brand offerings through the expansion opportunity at the outlet.”
Chinese retail markets achieved a compound annual growth rate in sales of 6.3 percent from 2018 through 2021, according to a report by Bain & Company, showing the sector’s resilience in the face of China’s pandemic experience.
Mainland China now accounts for 21 percent of luxury goods spending globally, according to the report, with ongoing growth expected to make the country the world’s largest luxury goods market by 2025, Bain & Co’s China Luxury Report 2021 shows.
“We expect Chinese consumers’ spending to continue its favorable growth boosted by the border reopening. The expansion of Florentia Village will allow us to harvest untapped revenue potential and create value through asset upgrades,” Christina Gaw said.
Florentia Village Guangzhou was the third outlet mall in the Silk Road Holdings China portfolio, following earlier openings in Wuqing near Tianjin and then Shanghai in early 2015. The mall chain now lists seven outlets in Greater China, including one location in Hong Kong.
From Fund to Fund
Gaw’s announcement of the Guangzhou asset sale on Friday comes after Silk Road sold its Wuqing facility, Florentia Village Jingjin and Florentia Village Shanghai to a fund invested by Allianz Real Estate, Gaw Capital and a German asset management firm based in Frankfurt in 2017.
That fund, ERES APAC II – China Outlets, was originally capitalised with $550 million in its first close that year, with investment from its three backers. The initial target was to raise around $750 million to establish a $2 billion portfolio by acquiring additional Florentia Village outlets in China.
Representatives of Gaw Capital and PIMCO Prime Real Estate, as Allianz Real Estate is now known, had not responded to inquiries from Mingtiandi regarding the participants in the Florentia Village Guangzhou acquisition, and whether the ERES APAC II fund was involved, by the time of publication. The management of Nuveen, which had invested in Silk Road through what was then its TH Real Estate unit, also had not responded by the time of publication.