Gaw Capital eyes more mezz debt, platform deals

Hong Kong-based private equity real estate investment firm Gaw Capital is growing increasingly active in mezzanine debt investments, having started doing third-party-generated deals in this area last year, says managing principal Christina Gaw.

Separately, the $10 billion fund manager is also looking to do more platform deals, which are scalable property investments to which more assets can be added.

“We are definitely looking at doing more mezz debt deals on very stable income-generating [property] assets,” she said. “As long as the common equity holders are trustworthy parties and the asset is proven to be generating good cashflow with an agreed yield, investors are very interested." 

“We don’t have a blind vehicle yet, but we are very active in this area now,” added Gaw, who is the firm’s main fundraiser. 

The firm sometimes generates private debt deals from core real esate assets it manages in London, she noted. “After we re-tenant and make operational improvements, we may do refinancing, depending on the situation, and this might even include a portion of the mezzanine debt." (Mezzanine is the tranche due to be paid back after the senior debt.)

Meanwhile, Gaw Capital wants to do more platform deals – like the $300 million logistics investment it made in China last year – because they have potential to scale up and provide connections to more partners with relevant expertise.

Gaw's flagship fund will generally focus on China to originate such opportunities, given its size as a target market, she said, but an important point is that they can expand regionally. 

Asked how the firm – which is currently raising an Asia-Pacific-focused vehicle with a target of $1.3 billion – is finding attracting and deploying capital in the current uncertain environment, Gaw was sanguine. 

“We have always been able to deploy capital effectively in various market conditions in Asia – but the current environment is interesting because of the volatility,” she said. 

“The global media is portraying a very worried outlook for China, given the currency fluctuations and so on, but … operational figures for our assets are showing steady and sustainable growth with low vacancy, especially in tier 1 locations.”

Gaw said it was beneficial that the firm often invested in less typical areas. “For example, we don’t go into prime retail [in China], but into retail outlet discount malls, which have done fantastically well while prime retail was suffering.”

What’s more, she added, the mainland economy may be slowing, but even 6% is amongst the fastest growth in the world for a country the size of China. 

“In the near-term the volatility will continue, and the oil price drop obviously doesn’t help – all this creates quite a bit of selling off in global equities because they’re liquid,” said Gaw. “But times like these provide the best investment opportunities for us – we just hope there is more capital that thinks similarly.”

* The full interview with Christina Gaw will appear in the upcoming (March) issue of AsianInvestor.