More than just a middleman

Real estate fund founder Goodwin Gaw sees Chinese investments in overseas property accelerating, following the loosening of mainland rules

PUBLISHED : Monday, 06 January, 2014, 12:28am
UPDATED : Monday, 06 January, 2014, 12:28am

When the mainland opened up its real estate market to overseas investment about a decade ago, Goodwin Gaw knew it was the opportunity of a lifetime.

With his knowledge and connections in China, the California-born Chinese in 2005 co-founded Gaw Capital Partners, a private equity real estate fund management firm, with his younger brother Kenneth to bring foreign capital into the mainland's property sector.

Little did he know that within a decade, his middleman role would reverse directions.

"I expected to draw overseas capital into China. I didn't expect to take Asian and Chinese investors overseas. It's interesting," said Gaw, managing principal of Gaw Capital. "And it is just the beginning," he said.

I didn’t expect to take Asian and Chinese investors overseas

Chinese state-owned enterprises and developers have been increasingly venturing into the overseas real estate market as the central government encourages mainland firms to invest abroad as part of a drive to speed up the internationalisation of the yuan.

According to international property consultant Jones Lang LaSalle, Chinese offshore real estate investment volumes for the first 11 months of last year exceeded US$5 billion, surpassing the old record of US$4 billion for the whole of 2012.

One of the most prominent overseas property deals last year was the £260 million (HK$3.32 billion) acquisition of the iconic Lloyd's Building in London by Ping An Insurance, the mainland's second-largest life insurer. Gaw Capital was the adviser in that transaction.

It was the first direct overseas property acquisition by a mainland insurer and followed the relaxation of rules by the China Insurance Regulatory Commission in October 2012 that allowed insurance companies to invest in other countries.

International property consultant CBRE estimates in a research report that mainland insurers could invest up to US$14.4 billion in overseas real estate.

"We received cold calls from Chinese institutional investors after we helped Ping An Insurance arrange the Lloyd's Building deal in London," Gaw said.

Currently, his company is helping a state-owned Chinese enterprise look for a property asset in Britain.

Apart from Chinese investors, Gaw Capital in November announced it was teaming up with South Korean institutional investors to acquire a commercial building in London that houses the global headquarters of retailer Marks & Spencer for US$321 million.

Gaw, 45, says he is confident of playing a new role to take Chinese and Asian investors offshore, given his 18 years' experience in overseas property investment. "We have a track record," he said.

His first investment in the US was made in 1995 through his Downtown Properties Holdings in Los Angeles when he was just 27, buying the then-derelict Roosevelt Hotel for US$10 million. The Hollywood landmark, where the first Oscars ceremony was held in 1929, now generates an annual revenue of US$48 million under Gaw's management.

Between 1995 and 2003, Downtown Properties executed some 42 deals.

Since 2010, when Gaw Capital set up an operation separate from its fund management business, it has been working with mainland and Asian clients to buy properties overseas.

The first real estate fund investment in China was made in 2005 when Gaw Capital was founded. Before 2005, Gaw Capital mainly looked at investment opportunities in China through partner Humbert Pang, a classmate of Gaw.

"Pang has been living in China since the late 1990s. He headed up the sales team of Savills China before joining Gaw Capital. We have been studying and learning about opportunities in China through Humbert," said Gaw.

Since 2005, Gaw Capital has raised more than US$3.57 billion and has assets under management totalling US$7.47 billion, including residential, retail, hotel and commercial properties.

It recently closed subscriptions for its fourth China real estate fund after collecting US$1 billion. About 40 per cent of the fund has been invested, with acquisitions including the Metropolitan Plaza in Guangzhou, which was bought from Hutchison Whampoa reportedly for 2.5 billion yuan (HK$3.2 billion).

In the US, the firm is raising a second fund targeting investments of US$500 million.

Gaw Capital's business has rapidly expanded in the past few years, fully occupying the brothers and prompting their mother to complain that they are not helping out with the family business - Pioneer Global Group, which was formerly known as Pioneer Industries International - that was inherited from their late father Anthony.

Pioneer has property investments in Hong Kong, mainland China and hotels in Myanmar and Thailand.

Born in Burma, the elder Gaw came to Hong Kong in 1955 and went to study in California, where Goodwin was born.

"My mother always complains that we don't help with the company's business," said Gaw, who is vice-chairman of Pioneer. His mother, Rossana Wang, is the chairwoman.

"Sometimes I advise her but often I have to say 'sorry, I really have no time to help'," he said.

Asked why he and his siblings do not concentrate on Pioneer (his younger sister Christina is the joint managing principal of Gaw Capital), Goodwin said: "No particular reason, other than wanting to create our own identity and blaze our own trail.

"It is more fun and more exciting to take full ownership of both your successes and failures, rather than playing defence in 'not screwing up what is given to you'."