Goldman Sachs in Real estate
Goldman Sachs‘s alternative division has successfully raised $3.6 billion for its latest real estate credit fund, providing significant firepower amid current market turbulence. This amount surpasses the approximately $2.6 billion raised from external investors for its predecessor fund, representing the largest capital pool assembled by the firm for this initiative.
Some financial institutions have scaled back their commercial real estate lending activities, leaving certain property owners struggling to secure financing amidst rising interest rates. Richard Spencer, chief investment officer for real estate credit at Goldman Sachs Alternatives, stated on Monday (May 13), “The strategy is to capitalize on what we perceive as a growing disparity between supply and demand for real estate debt financing.”
Additionally, the bank is committing $1.4 billion of balance sheet capital alongside the fund, named West Street Real Estate Credit Partners IV, which will be leveraged with approximately $2 billion, resulting in a lending capacity exceeding $7 billion, according to informed sources who requested anonymity due to the sensitivity of the information. The fund aims for returns of 10 to 12 percent after fees.
The new fund will focus on originating, underwriting, and holding loans secured by high-quality real estate. Goldman intends to provide first-lien mortgages backed by “transitional” properties undergoing renovation, change of use, or development, as well as mezzanine financing for leased and stabilized properties. The fund has already committed over $1.8 billion, according to Spencer and Jim Garman, global head of real estate at Goldman Sachs Alternatives, though specifics on these investments were not disclosed.
Unlike its predecessor, the new fund will have a broader investment mandate covering OECD countries in the Asia-Pacific region, with a focus on Australia due to its robust creditor protections and regulatory pressures on traditional lenders to mitigate risks, Spencer explained.
Goldman Sachs may concentrate its lending activities on residential, industrial, hospitality, and select office properties that benefit from technological, demographic, and sustainability trends, according to Spencer.
The fund received support from sovereign wealth funds, insurance companies, pension plans, family offices, and wealth management clients, though Goldman declined to provide further details.
