Gaw Capital raising half of $360 mn US value-add fund from Korea

Hong Kong-based real estate investment firm Gaw Capital Partners is on track to raising 200 billion won ($180 million) for its 400 billion won ($360 million) US value-add fund from South Korean institutional investors, while looking to increase investment in residential facilities in downtown Seoul.

The US Value Add Fund III is reportedly targeting around 15% annual return from US commercial real estate, coming on the heels of its $1.3 billion opportunistic real estate fund closed in April to target the Greater China and Asia Pacific region.

“The fundraising (in Korea) is going smoothly as far as we know,” a source involved in the fundraising process told the Korean Investors on Nov. 6. But he declined to give details, citing a confidentiality agreement.

Of the targeted commitments of 200 billion won from South Korea, real estate boutique firm Korea Asset Investment Management (KAIM) has participated for an undisclosed sum.

The other institutional investors committing to the fund were not identified.

KAIM, established in 2015 and part of a South Korean property developer, hopes the commitment to help source high-yielding products in oversea markets, including real estate assets in gateway cities of the western US.

At home, KAIM focuses on value-add and development projects and plans to attract foreign capital to domestic real estate projects.

Goodwin Gaw, founder and chairman of Gaw Capital, told the Seoul Economic Daily in an interview last month that he saw opportunities in luxury home and rental housing markets in South Korea and was looking to invest in housing facilities in downtown Seoul to meet demand from office workers.

It made its first acquisition in South Korea in 2014 with the purchase of a mixed-use building, and bought a housing facility in central Seoul.

In the US, it had teamed up with Korean Teachers’ Credit Union (KTCU) and MG Korean Federation of Community Credit Cooperatives to buy 333 Market Street in San Francisco in 2010 and Three First National Plaza in Chicago in 2011.

Both acquisitions produced double-digit exit returns: 37% (cumulative) from Three First National Plaza and 17% (annualized) from 333 Market Street, according to KTCU in 2014.

Gaw Capital Partners has raised $8.6 billion in equity since it was established in 2005 and has assets of $13 billion under management as of the second quarter of 2017, according to its website.

By Jinsoo Kim

true@hankyung.com