Hong Kong-based private equity firm Gaw Capital Partners is exploring real estate deals in Japan’s western island of Kyushu, citing the opportunity that Taiwan Semiconductor Manufacturing Co. factories being built could bring to the region.
“We are looking in that area, obviously we believe that with TSMC, it would change the market a lot,” Isabella Lo, Gaw’s managing director and head of Japan investments, said in an interview Wednesday. Gaw, which already manages $3.8 billion of property assets in Japan, has just begun its search in Kyushu — a region where it hasn’t made acquisitions before, Lo said, adding that she would be interested in developing a logistics property and buying residential real estate in the area.
TSMC is building an $8 billion fabrication plant in Kyushu’s Kumamoto prefecture in partnership with a subsidiary of Sony Group Corp. that is expected to come online in late 2024, as the chipmaker diversifies its operations amid geopolitical tensions and chip shortages. The Taiwanese company is planning a second factory in Kumamoto for completion in the late 2020s, Nikkan Kogyo reported in February.
Gaw, which manages about $35.7 billion of real estate assets globally, has been particularly active in Japan in the past year, attracted by the country’s weak currency and low interest rates. The fund already owns a handful of office and apartment buildings and industrial property in the island nation, mostly around the metropolitan areas of Tokyo and Osaka.
Kyushu is more known in Japan for its mountains, beaches and hot springs than the commercial activity that’s typically drawn real estate investors to areas around Tokyo and Osaka. The opening of an advanced chip factory could bring investment to the region, and the Japanese government is providing subsidies for the project.
Active in Japan
Gaw has plans to invest about $3.5 billion to $4 billion in Japan by mid-2024, and isn’t near that goal yet, Lo said. In the short term, the fund is hoping to do more deals in logistics, data centers and hospitality. Another region that Gaw is bullish on is Osaka — Japan’s second largest metropolitan area — as the city has high growth potential with the nation’s first casino resort to open there, Lo said.
In the past six months, Gaw has purchased a portfolio of logistics properties around Tokyo, and bought the Hyatt Regency hotel in the capital in a joint deal with KKR & Co.
Read more on global investors buying Japanese hotels
Gaw’s favorite Japan investment right now is hotels, as the weak yen can attract foreign tourists and keep domestic tourists home, generating strong demand. Still, there’s a lack of good deals on the market and some properties for sale are too expensive, Lo added.
“In an inflationary environment, hotels is probably the best sector where you can increase your rates on a daily basis and not be locked into a long-term lease,” like with offices, she said. “You can actually increase your price.”
(Updates with details on Gaw’s real estate holdings in Japan in fourth paragraph)
