Gaw Capital plans US$500m US property fund for China investors

US office market recovering, with asking rents increasing quarterly for more than two years

PUBLISHED : Saturday, 07 September, 2013, 12:00am
UPDATED : Saturday, 07 September, 2013, 4:57am

Hong Kong-based real estate investor Gaw Capital Partners plans a US$500 million United States property investment fund targeted at mainland and other Asian investors.

"The market in the US is not bad at the moment, and the proposed fund is likely to invest in quality commercial properties," said Goodwin Gaw, chairman and managing principal of the firm.

The US office market has been recovering, with asking rents increasing for the 10th consecutive quarter in this year's second quarter, a report from Chicago-based property broker Jones Lang LaSalle said.

Jones Lang LaSalle expects the scarcity of large-sized quality blocks to help trophy products in prime locations to continue to lead the recovery with continuing rent increases, despite a rise in interest rates.

The growth in the US market has prompted Asian investors, including mainlanders, to look for investment opportunities there, as the governments of their home countries introduce measures to cool overheated property markets.

Gaw said this was his firm's second fund to invest in the US property market, as Asian investors showed growing interest in putting capital in that class of asset. The fund was expected to attract money from South Korean, Singapore and mainland insurance firms. The first fund, about US$100 million in size, is fully invested.

The main strategy of the new fund, which will be run by the firm's recently formed Gaw Capital US unit, will be value creation through design, creative repositioning and redevelopment. There will also be a special focus on creative office and creative hospitality redevelopments in urban locations.

The new entity, with more than 40 staff, will include the company's existing US business.

"The unit is not totally new. We started investing in the US in 1995," Gaw said.

Gaw Capital has also been helping its Asian clients to buy individual properties abroad. One of its recent deals was Ping An Insurance's £260 million (HK$3.1 billion) purchase of the Lloyd's building in London in July.

"Many Chinese institutions, including insurance companies, approached us after the deal. I think there's more to come," Gaw said. Some deals are being negotiated for such clients, he added.

Jones Lang LaSalle estimates mainland direct commercial property acquisitions offshore amounted to US$2.7 billion in the first half, mostly in the US. It expects the total to reach US$5 billion by the end of the year.

Gaw said staff had been hired at the US entity, including Timothy Walsh, who joined Gaw Capital US as president and chief operating officer from the New Jersey Division of Investment, where he was chief investment officer and director of the state's US$74 billion pension fund.