Gaw Capital Leads $260M Fundraise to Shore Up of Hong Kong’s CSI Properties

Kenneth Gaw, president and managing principal of Gaw Capital Partners

Hong Kong real estate group CSI Properties is reinforcing its balance sheet amid a slumping local market with HK$2 billion ($260 million) in fresh fundraising, including HK$758 million in new equity capital from fund manager Gaw Capital Partners.

CSI will raise a total of HK$1.5 billion in new equity capital from a rights issue, with the remaining HK$500 million to come in the form of debt funding from senior unsecured notes provided by Gaw, the companies said Sunday in a release. The campaign is intended to strengthen CSI’s balance sheet and financial position, provide working capital for ongoing projects and enable retirement and refinancing of debt obligations.

The rights issue will be priced at a premium to CSI’s last closing price on the Hong Kong stock exchange as a “demonstration of confidence”, with chairman and controlling shareholder Mico Chung to personally underwrite HK$400 million worth of rights shares. The premium reflects the belief of Chung and privately held Gaw in unlocking hidden value from a significant discount to net asset value and the long-term fundamental upside of CSI, according to Sunday’s statement.

“We are excited to welcome Gaw Capital as a true business partner from the angle of their global expertise and looking at things from an institutional investor perspective,” Chung said. “I am firmly committed to remain as the major controlling shareholder and this fundraising exercise will not result in any change of control. Indeed, I am thankful for Gaw Capital’s confidence in me and our management.”

Teams Join Forces
CSI reported a HK$914.6 million loss for the six months to the end of December, citing write-downs in real estate asset values, and the company halted trade of its shares on 23 January ahead of this week’s announcement with Hong Kong-based Gaw.

CSI Properties chairman and executive director Mico Chung (Image: CSI Properties)

CSI’s management team plans to work with family-controlled Gaw to tap the private equity firm’s global network and institutional expertise. While control and management of CSI will remain unchanged, Gaw will become a valuable and strategic business partner, the companies said.

“Gaw Capital values the opportunity to collaborate with CSI Properties as a strategic shareholder, with which it has enjoyed a business relationship dating back to 2012,” said president and managing principal Kenneth Gaw.

Gaw has committed to a four-year lock-up period, during which it will help CSI execute a HK$9 billion disposal programme of prime residential and commercial assets.

CSI’s portfolio includes a 30 percent interest in an office building at 38 Wai Yip Street in Kowloon Bay; the FOCO commercial complex in Central; a 51 percent stake in the Novotel redevelopment project in West Kowloon; a 25 percent slice of Harbourside HQ in Kowloon Bay; and two retail arcades in Shanghai, In Point and Richgate Plaza.

CSI scored one of Hong Kong’s biggest office leases of 2023 when it signed the city’s Hospital Authority to take up 100,000 square feet (9,290 square metres) of office space at Harbourside HQ. Chung had expected the deal to bring more attention to Grade A offices in Kowloon East, but the district finished 2024 at 18.6 percent vacancy, the highest rate among key submarkets tracked by JLL and barely improved from 18.7 percent one year earlier.

Agility in Japan
Gaw’s bet on a Hong Kong rebound comes after the firm last month acquired a 45 percent stake in Tokyo-based Agility Asset Advisers in a bid to raise its corporate profile and reputation in Japan’s real estate market.

Under the terms of the deal, Gaw and Agility Asset’s parent company, Singapore-based Phillip Capital, will each take a 45 percent stake in the firm, with the remaining 10 percent held by a vehicle controlled by Agility Asset’s founding president, Kinji Kaiho.

“By partnering with Agility Asset Advisers Inc, we are well-positioned to drive growth by redesigning and repositioning under-utilised real estate assets, unlock new opportunities, such as REIT initiatives, and deliver enhanced value to our investors in Japan and beyond,” said Isabella Lo, head of Japan at Gaw.