Gaw Capital Checks Out of Hotel California with 76% Haircut

Gaw Capital Partners has sold a hotel in California’s Bay Area for a quarter of what it paid to acquire the property eight years ago, as hospitality occupancy and revenue in the tech hub struggle to recover to pre-pandemic levels.

The Hong Kong-based private equity firm sold the Courtyard Oakland Downtown last month to an affiliate of Atlanta-based real estate investment firm Core Property Capital for $10.6 million, according to local media outlet SiliconValley.com citing Alameda County records. That price represents a 76 percent haircut on the $43.8 million Gaw paid for the 162-key hotel in 2016.

Hotel performance in San Francisco, located roughly 11 miles (17.9 kilometres) west of the Courtyard Oakland Downtown, has yet to recover to 2019 levels, with the San Francisco Travel Association in September forecasting 62.8 percent average citywide occupancy this year, compared to 82.7 percent in 2019, while revenue per available room (revPAR) is expected to decline 9.7 percent year-on-year.

“Now, at the end of the first half of 2024, there is a recognition that any significant improvement in the San Francisco hotel market will likely require both patience and a longer-term perspective,” consultancy Cushman & Wakefield said in a July report. “Based on recent data and market sentiment, a more complete hotel recovery is not expected until 2030, and even then is unlikely to look like past market peaks.”

Heartbreak Hotel

Gaw’s divestment of the Marriott-branded hotel works out to $65,432 per key. The property was valued at $44.6 million ($275,309 per key) as of January, according to Alameda County estimates. Gaw Capital had not responded to Mingtiandi inquiries by the time of publication, while Core Property Capital could not be reached for comment.

Situated at 988 Broadway in the city of Oakland, the five-storey hotel features 1,300 square feet (121 square metres) of ground-floor retail space and 2,700 square feet of meeting space.

Gaw had acquired the hotel through its US affiliate, Gaw Capital USA, which managed $2.6 billion of assets as of the end of 2023. The unit’s portfolio comprises hospitality, office, and retail properties in the San Francisco Bay Area, Los Angeles, San Diego, Seattle, Chicago, Nashville, New York and Honolulu, according to the company’s website.

The disposal comes after the firm headed by Goodwin Gaw had taken advantage of San Francisco’s beaten down office market in late 2023 when it bought back the North Park office campus along the city’s Embarcadero from Blackstone for $82 million, after the fund manager had sold the same complex to the New York-based giant for $245 million in 2018.

Other Bay Area investments in Gaw’s portfolio include the 500-room Oakland Marriott City Center, and the 153-key Hotel G San Francisco, along with the 555 Montgomery Street and Hamms Building office blocks in San Francisco, as well as the Bayfair Center shopping complex in San Leandro.

Asia Pacific Moves

With property values slumping in the US, Gaw Capital has focused its acquisitions in Asia Pacific’s developed markets this year, picking up properties across a range of sectors in Australia and Japan.

In August the fund manager established an A$500 million ($325 million) partnership with Sydney-based real estate investment manager Ray White Capital to invest in and manage private credit opportunities across Australia and New Zealand.

That tie-up was announced two months after Gaw formed a joint venture with Brisbane-based GreenFort Capital to acquire and develop an A$800 million ($533 million) pipeline of Australian land lease community projects aimed at pensioners.

In Japan, Gaw in May acquired a third property for its western Tokyo data centre campus, with the deal set to add 38 megawatts of IT capacity to the firm’s existing development in Fuchu City. The investment manager has also bet on Japan’s multi-family market, having teamed up with Alyssa Partners in April to acquire a portfolio of 29 Tokyo apartment buildings on behalf of separate accounts for the Qatar Investment Authority and other investors.

In April, the company expanded its northern Asia presence by hiring former World Bank Group executive Hyun-Chan Cho as head of both its Korea business and its infrastructure division.