Key Takeaways
- • Blue Mountain Bridge, a Hong Kong-based private credit firm, is raising its first fund targeting $250 million, aiming to secure $150 million by end-2025, according to chief investment officer Raymond Chan.
- • Gaw Capital, a real estate private equity manager with $34.4 billion in AUM, is launching a new fund targeting $2 billion commitments to invest in private credit and private equity deals across tier-1 and tier-2 Asia Pacific cities, including Hong Kong, per a person with knowledge of the matter.
- • Hong Kong commercial property vacancy is near a record 20% and prices have fallen 40% from the 2019 peak, per CBRE data, while total property development and investment loans were down 12.6% year-on-year at end-2024 per HKMA data.
- • Private credit rates have fallen to the high single- and low double-digit range from mid-to-high teens in 2023 as competition intensifies, prompting advisers to urge lower LTVs, tighter covenants and more equity cushion.
- • CBRE estimates a 2025-2027 funding gap of $720 million across Hong Kong office, industrial and retail sectors driven by capital value repricing and rental adjustments.
Summary
Private credit managers are stepping into Hong Kong's property market as banks pare exposure amid falling valuations, according to Reuters. Gaw Capital Partners and Blue Mountain Bridge Capital are among firms raising new funds for the Asia Pacific region, including Hong Kong, despite market volatility linked to U.S. trade policy. Reuters reports that access to private credit offers a major, though short-term, source of relief for developers worried about servicing debt as demand and prices decline.
Blue Mountain Bridge is seeking $250 million for its first fund, with a $150 million close targeted by end-2025. Chan said, "This is the best time to be a private credit investor in Hong Kong." In January, the firm closed a $33.4 million one-year senior loan secured by a newly converted office property, paying a 15% annual coupon at a 63% loan-to-value ratio. In December, it exited a $64.1 million senior one-year refinancing loan to a developer with a 15% internal rate of return. That compares with an average net IRR of 11.9% for private credit and direct lending funds over 2018 to 2023, according to an S&P Global report cited by Reuters.
Gaw Capital, which manages $34.4 billion in assets, is targeting a $2 billion commitment for a new fund investing in both private credit and private equity deals, according to a person familiar with the matter who declined to be named. Gaw declined to comment. Sun Hung Kai & Co, a local alternative investment company, co-invested in a $100 million residential mortgage portfolio from developers in November and plans to close another portfolio soon. Managing director Gigi Wong said the firm is approached by both distressed and high-quality developers, as well as Hong Kong banks seeking to sell secondary or problematic loans.
The lending push follows liquidity problems at New World Development (0017.HK) and smaller developers, raising concerns about a possible sector-wide domino effect. Moody's said in February that falling sales and rents, high vacancies and interest rates are eroding landlords' debt-servicing capacity, prompting banks to curtail financing. Hong Kong Monetary Authority data show total property loans have declined since 2022. CBRE data show commercial property is the weakest segment, with vacancy near 20% and prices down 40% from the 2019 peak; some distressed commercial properties traded at 60% below peak prices last year. CBRE estimates a $720 million funding gap for 2025-2027 across office, industrial and retail sectors.
Family offices and wealthy individuals are entering private credit, attracted by yields above direct real estate investment, according to JSM partner Jasmine Chiu. Competition has pushed private credit pricing down to the high single- and low double-digit range from the mid-to-high teens in 2023. Some firms are holding back over valuation expectation gaps. Raffles Family Office's Sky Kwah advised investors to seek lower LTVs, tighter covenants and greater equity cushions, warning that lenders may accept looser terms or weaker collateral to deploy capital, and that lenders could take losses if the market corrects further. Ares Management's Edwin Wong said refinancing maturing loans is very difficult in the current market and that the firm is evaluating opportunities across the senior-to-junior debt spectrum.
Blue Mountain Bridge is seeking $250 million for its first fund, with a $150 million close targeted by end-2025. Chan said, "This is the best time to be a private credit investor in Hong Kong." In January, the firm closed a $33.4 million one-year senior loan secured by a newly converted office property, paying a 15% annual coupon at a 63% loan-to-value ratio. In December, it exited a $64.1 million senior one-year refinancing loan to a developer with a 15% internal rate of return. That compares with an average net IRR of 11.9% for private credit and direct lending funds over 2018 to 2023, according to an S&P Global report cited by Reuters.
Gaw Capital, which manages $34.4 billion in assets, is targeting a $2 billion commitment for a new fund investing in both private credit and private equity deals, according to a person familiar with the matter who declined to be named. Gaw declined to comment. Sun Hung Kai & Co, a local alternative investment company, co-invested in a $100 million residential mortgage portfolio from developers in November and plans to close another portfolio soon. Managing director Gigi Wong said the firm is approached by both distressed and high-quality developers, as well as Hong Kong banks seeking to sell secondary or problematic loans.
The lending push follows liquidity problems at New World Development (0017.HK) and smaller developers, raising concerns about a possible sector-wide domino effect. Moody's said in February that falling sales and rents, high vacancies and interest rates are eroding landlords' debt-servicing capacity, prompting banks to curtail financing. Hong Kong Monetary Authority data show total property loans have declined since 2022. CBRE data show commercial property is the weakest segment, with vacancy near 20% and prices down 40% from the 2019 peak; some distressed commercial properties traded at 60% below peak prices last year. CBRE estimates a $720 million funding gap for 2025-2027 across office, industrial and retail sectors.
Family offices and wealthy individuals are entering private credit, attracted by yields above direct real estate investment, according to JSM partner Jasmine Chiu. Competition has pushed private credit pricing down to the high single- and low double-digit range from the mid-to-high teens in 2023. Some firms are holding back over valuation expectation gaps. Raffles Family Office's Sky Kwah advised investors to seek lower LTVs, tighter covenants and greater equity cushions, warning that lenders may accept looser terms or weaker collateral to deploy capital, and that lenders could take losses if the market corrects further. Ares Management's Edwin Wong said refinancing maturing loans is very difficult in the current market and that the firm is evaluating opportunities across the senior-to-junior debt spectrum.
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