China property

Slow economy in China creates investment opportunities, says Gaw Capital

PUBLISHED : Tuesday, 17 November, 2015, 9:00am
UPDATED : Wednesday, 18 November, 2015, 12:01am

Gaw Capital Partners, a private equity real estate fund management firm, will shift its investment focus in mainland China over the next three years as the country’s bumpy economy creates new opportunities, says company chairman Goodwin Gaw, who recently led a consortium which purchased InterContinental Hong Kong for US$938 million.

On the other hand, good acquisition targets have declined in the US and Britain, where both economies are stabilising.

“Let’s say in the last three years, if I had HK$100, I would have invested 60-65 per cent in overseas and 35 per cent in Greater China. For the next three years, I will invest 55-60 per cent in China and 40 per cent overseas,” said Gaw.

The Hong Kong-based private equity real estate fund management firm, which commands assets of US$ 10.61 billion under management as of the second quarter of 2015, was founded by the California-born Chinese in 2005 with his younger brother Kenneth to bring foreign capital into the mainland’s property sector.

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.

Since 2010, Gaw Capital Partners has acquired 10 direct investments in London and the US on behalf of its separate account Asian clients. In an example, the company advised Ping An Insurance for the Lloyd’s Building deal in London for GBP260 million in 2013. This year, it advised a consortium led by Pioneer Global and Korean funds for the InterContinental Hong Kong in Tsim Sha Tsui, for US$938 million.

Pioneer is controlled by the Gaw family, whose members include Goodwin Gaw and Kenneth Gaw, the founders of Gaw Capital.

“Good investment opportunities lie in every adjustment period in China ,” he said.

China’s economy grew 6.9 per cent in the July-to-September quarter from a year earlier, data showed last month.

As the world’s second-largest economy looks set to slip to a 25-year-low this year of growth under seven per cent, the central bank cut benchmark interest six times since last November and repeatedly reduced banks’ reserve ratio requirements. Analysts are concerned with the country’s economic outlook.

“When you do not know when the market will get better, it is time to buy. If everyone has an insight of the market, it will draw competition,” said Gaw.

Gaw’s optimistic projection in the country’s long-term economy was backed by the fast-growing middle class.

“The middle class size in China is pretty small when compared with its huge population and the income of their middle class is around US$10,000 per year. I believe both the size of the middle class and their income will continue to grow. Consumption power is very strong,” said Gaw.

China will exceed the US to become the largest economy somewhere in the next 10-15 years, he predicts.

The acquisition spree in mainland China actually began last year.

A company belonging to one of Gaw Capital’s funds acquire Richard Li’s Pacific Century Place in Beijing for US$928 million. It also acquired the Metropolitan Plaza in Guangzhou’s Liwan district for US 390.7 million from the Cheung Kong group.

In C-Suite, Gaw explains why he bought the InterContinental Hotel and his views on whether or not the Central government is using quantitative easing as a policy to help stimulate economic growth.