Gaw Capital's Loan Negotiations and the Broader Liquidity Risks in Private Real Estate Debt

The private real estate debt market in 2025 is at a crossroads, shaped by a confluence of factors: rising interest rates, regulatory pressures on traditional lenders, and a wave of maturing debt. At the center of this evolving landscape is Gaw Capital Partners, whose recent loan defaults and refinancing challenges underscore broader liquidity risks and the shifting role of private credit in commercial real estate.

The Oakland Marriott Default: A Microcosm of Sector Struggles

Gaw Capital's default on a $100 million loan tied to the Oakland Marriott City Center in February 2025 has become a case study in the fragility of hospitality assets. The hotel, purchased in 2017 for $143 million, was sold at a foreclosure auction in July 2025 for $70.2 million-a 51% devaluation-highlighting the sharp decline in property values amid public safety concerns and reduced demand in Oakland, according to a Sterling Asset Group report. This default is not an isolated incident but part of a pattern: the firm also sold the Courtyard Oakland Downtown at a loss and saw another Oregon property enter receivership, as detailed in a CenterSquare outlook.

The Oakland case reflects a broader trend of valuation gaps in the hospitality sector, where pre-pandemic optimism has given way to operational challenges and shifting consumer behavior. For private real estate debt investors, such defaults amplify concerns about asset quality and the risks of overleveraged portfolios.

Hong Kong's Office Market: A Test of Resilience

While the U.S. challenges are stark, Gaw Capital's refinancing efforts in Hong Kong offer a more nuanced picture. The firm secured an amended loan for Cityplaza Three and Four, extending the facility's maturity by two years and increasing the loan size to HK$10.8 billion (around $1.4 billion) to align with current market conditions, according to a Bloomberg report. This adjustment, coupled with ongoing negotiations for a HK$5.4 billion refinancing of Cityplaza One, demonstrates the firm's ability to navigate liquidity pressures in a market where prime office vacancy rates have risen sharply; that Bloomberg report also noted the extended maturities and lender concessions.

However, these efforts also highlight the structural weaknesses in Asia-Pacific commercial real estate. Hong Kong's office sector, once a magnet for global capital, now faces headwinds from remote work trends and economic uncertainty in China. For private lenders, the risk-reward calculus has shifted: while Hong Kong's robust legal enforcement systems make it an attractive jurisdiction, the need for personal guarantees and stricter covenants underscores the heightened caution among lenders, as Gaw Capital notes in its own analysis (see Gaw Capital commentary).

The Rise of Private Credit: Filling the Funding Gap

The withdrawal of traditional banks from commercial real estate (CRE) lending has created a $300 billion funding gap in the U.S. alone, with $4.5 trillion in CRE debt maturing by 2028, according to the Sterling Asset Group report cited above. This void has been filled by private credit funds, which raised record capital in 2025. For example, Blackstone closed its $8 billion Real Estate Debt Strategies V fund in March 2025, while KKR and Brookfield expanded their lending pipelines to meet surging demand, as noted in the same Sterling Asset Group analysis.

Gaw Capital itself has pivoted toward private debt strategies, targeting $2 billion for its Gateway Real Estate Fund VIII to finance deals in Asia-Pacific markets, per a Bloomberg report. This shift aligns with industry trends: nonbank lenders now originate 34% more CRE loans than traditional banks, which have retreated to 30% of their historical market share, according to the Sterling Asset Group piece referenced earlier. The firm's recent HK$300 million loan to First Group Holdings for a Kowloon industrial project further illustrates the growing role of private credit in supporting distressed developers, as outlined in that Bloomberg article.

Market Implications: A "Maturity Wall" and Strategic Rebalancing

The broader private real estate debt market faces a $1.7 trillion maturity wall between 2024 and 2026, with 2026 alone accounting for $1.8 trillion in maturing loans, according to the CenterSquare outlook referenced above. This creates both risks and opportunities. On one hand, borrowers like Gaw Capital must contend with higher borrowing costs and tighter covenants. On the other, private lenders can offer flexible structures-such as mezzanine debt, rescue capital, and gap financing-to capitalize on distressed assets, a dynamic noted in the Bloomberg coverage of amended Hong Kong loans.

Experts predict a moderate recovery in CRE activity in 2025, with a 25% increase in lending as banks selectively re-engage, according to a Lightbox forecast. However, the market remains constrained by stale valuation marks and a lack of buyers for existing assets. Continuation funds and private credit strategies are increasingly used to delay liquidity pressures, but the window for distressed opportunities is narrowing. As Kenneth Gaw and Foster Lee of Gaw Capital note, the current dislocation offers mid-to-high teens returns, but this window is expected to close within 12–18 months, according to Gaw Capital's commentary.

Conclusion: Navigating Uncertainty in a Transformed Market

Gaw Capital's loan negotiations serve as a microcosm of the private real estate debt market's transformation. While the firm's defaults in the U.S. and refinancing challenges in Asia-Pacific highlight liquidity risks, they also underscore the growing importance of private credit as a stabilizing force. For investors, the key lies in balancing caution with opportunity: leveraging flexible financing structures to support value-add assets while avoiding overexposure to sectors like hospitality and office real estate.

As the market grapples with a "higher for longer" interest rate environment and a looming maturity wall, the ability to adapt-like Gaw Capital's pivot to private debt-will determine long-term success. The coming months will test whether private lenders can sustain their role as the new backbone of CRE financing or whether further dislocations will force a reevaluation of risk-return profiles.