$ 30 billion fund builds up in Hong Kong office market

HONG KONG (Bloomberg): One of Hong Kong’s most active commercial real estate players is more optimistic than ever.

Gaw Capital Partners, a private equity firm with US $ 30 billion under management, has deployed more money in the past 12 months in the city than in the previous two or three years combined, even as the companies are reducing space and rethinking the role of offices in a post-pandemic world.

“The office is where there are more differences of opinion in the future, so people may be able to find opportunities where someone has a more pessimistic view,” said President Goodwin Gaw .

“You are rarely able to find a high quality, institutional grade Class A desk that you can buy at a reasonable price. “

Gaw, 52, who runs the 16-year-old company with his two younger siblings, said forecasts calling for a sharp decline in the Hong Kong office market are largely wrong. As banks, including UBS Group AG, have reduced their footprint and rental rates are falling, Chinese companies are helping to fill the gaps. Gaw said the global trend to work more from home will not be as widespread in Asia because of smaller apartments.

“It’s hard not to predict that Hong Kong will be successful in the long run, being essentially New York City with the world’s second-largest economy,” Gaw said.

Gaw’s optimism runs counter to market sentiment. Office rents in Hong Kong fell 26% in April from two years ago, while vacancy rates jumped to 10.5%, the highest since 2006, according to data from Colliers International Group Inc .. S&P Global Ratings said rents and office occupancy rates in Hong Kong’s central business district will not decline until 2022, with stress lingering even longer in non-core areas, report says last month.

Gaw was not deterred and has been the largest non-developer investor in Hong Kong’s commercial real estate market since 2007 in total deal value, according to data from Real Capital Analytics. The company purchased $ 8.9 billion worth of properties during the period.

Their recent large-scale investments included a $ 1.3 billion interest in an office tower sold by Swire Properties Ltd. last year, and a basket of shopping malls from Link REIT for $ 1.5 billion in 2018.

Gaw’s primary investment vehicle, Gateway Funds, currently holds 41% of its Asia-Pacific portfolio in offices, 16% in residential and 12% in retail.

Kenneth Gaw, chairman and co-founder of the company, believes vacancy rates in Hong Kong have bottomed out and rental rates may soon follow suit.

Gaw Capital, known for upgrading underutilized commercial properties for higher value, plans to adapt to the post-pandemic office standard by adding more rooftop space, higher ceilings in the lobby and more common areas in traditional buildings. Kenneth Gaw expects most workers to be back in the office once the pandemic subsides.

“At the end of the day, basic human nature will prevail – If you’re a good company with a good working environment, you’re going to attract the type of employees who want to be in the office to interact with other smart people,” he said. he said in an interview with Bloomberg Television

“They want to be there, to show their bosses how hard they work, what kind of leadership qualities they have.”

Goodwin Gaw, the Stanford-educated mogul and his brother Kenneth, 50, founded Gaw Capital in 2005 after gaining experience repositioning distressed properties in the United States. The company also became an intermediary for US institutions wishing to tap into the growing Chinese market as it opened up.

The strategy has served them well. From its first investment vehicle of $ 200 million, Gaw Capital now manages assets worth more than $ 30 billion worldwide. Over the years, she has acquired properties across the world, from Four Seasons resorts in Bora Bora to office towers like Milton Gate and Exchange Tower in London.

In addition to partner Humbert Pang, the Gaw brothers added their younger sister Christina Gaw to the company in 2008. The former banker of UBS and Goldman Sachs Group Inc. brought her connections and knowledge of institutional investors, who now represent around 80% of their supporters.

“During the initial phase, my brothers were focused on investing, making sure those investments were made right,” said Christina Gaw, 48, in a separate interview.

“I could use my capital markets expertise to approach the right investor base. “

In addition to purchasing unique assets, Gaw Capital began building thematic platforms including logistics properties and data centers in 2014 and 2019.

Gaw has also established itself in the tech space, supporting companies like Chinese online property platform KE Holdings Inc. (Beike) and cohabitation space operator Beijing Ziroom Information Technology Co. In addition to this, you need to know more about it.

The company completed the final close of a real estate technology-focused fund in late May, with total capital raised of $ 430 million. He also plans to raise at least $ 200 million through a special purpose acquisition company in the United States targeting tech companies in Asia, Bloomberg reported in February.

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