Special Situations

Gaw Capital Enters Distressed Real Estate Sector With $1B New Fund With Country Garden Unit

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Hong Kong-based private real estate investment firm Gaw Capital has teamed up with Shenzhen Paladin Asset Management, the investment arm of one of the largest Chinese property developers, Country Garden Group,to jointly launch a US$1 billion special situations fund to invest in distressed real estate projects in China, Gaw Capital confirms to China Money Network.

Gaw Capital is the latest players to enter into China’s distressed debt and distressed asset space, following new investment funds or new distressed asset purchases by offshore investors including Bain Capital, Blackstone Group and Oaktree Capital Management.

As an investment firm focused on real estate investments, it is a natural move for Gaw to expand into distressed property projects as Chinese property firms face increasingly tight liquidity conditions and are going into distress more often than ever.

The investment strategy of Gaw is acquiring property projects with potential to be re-positioned and upgraded to increase their value. Gaw’s participation in a US$3 billion purchase of a retail portfolio comprising 17 shopping centers in Hong Kong in September 2017 aimed to improve the mall’s conditions and operations. In 2015, Gaw purchased the InterContinental Hotel Hong Kong for US$938 million and is spending significant capital to refurbish it.

"The establishment of this fund reflects increasing maturity of the Chinese distressed real estate market," a distressed debt investor said on the conditions of anonymity. "As more established and professional players enter the space, investors will need to be highly skilled property experts in order to succeed."

No details of the new fund has been disclosed, but it will target to raise US$1 billion to acquire and turnaround real estate projects in China that have gone into financial or operational distress, according to a joint announcement.

Gaw Capital has raised more than US$10 billion of equity since 2005 and manages US$18 billion of assets as of the first quarter, 2018.

Shenzhen Paladin Asset Management was established in 2015 by Country Garden Group as the Chinese property developer’s investment arm. It currently has over RMB10 billion (US$1.47 billion) under management.

Hong Kong-listed Country Garden is one of the largest property developers in China, with recorded revenues of RMB227 billion (US$36 billion) and pre-tax profits of RMB46 billion (US$7 billion) in 2017.

 


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