Goldman Raises $2.6B To Lend To Real Estate As Banks Pull Back
Investment banking giant Goldman Sachs has raised $2.6B for a new fund to lend to real estate, taking advantage of wariness about the sector from traditional lenders.
A filing with the Securities and Exchange Commission earlier this month showed that Goldman had raised money for West Street Real Estate Credit Partners IV, a real estate debt vehicle it launched in December 2022.
The capital raising could be supplemented by further debt and equity for the fund. It is also part of a strategy to boost the capital raised and deployed by Goldman’s asset management business using money from outside investors as it trims exposure to real estate on its own balance sheet.
As previously revealed by Bisnow, the fund could ultimately raise $7B or more to lend to real estate interests. Its predecessor, Broad Street Real Estate Credit Partners III, raised $2.5B in equity from external clients, added $1.7B of the bank’s own money plus money from employees, and supplemented the $4.2B of equity with $2.5B in debt.
Previous Goldman debt funds have targeted returns of 7% to 8%, making loans of between $100M and $500M in the U.S. and Europe.
Institutional investors in the new fund include Samsung SRA Asset Management, according to Samsung SRA’s website.
In its full-year results released last week, Goldman said it had taken less of a loss on the real estate loans on its balance sheet in 2023 than in 2022, though it took a bigger write-down on its real estate equity investments.
Because of the volatility in the market, Goldman has for the first time started separately reporting the size of its real estate exposure and how it is performing.
The bank had $25B of real estate loans at the end of 2023, 14% of its entire loan book. Of those real estate loans, 2% are more than 30 days past their repayment date.
Separately, it has about $11B of real estate equity investments, on which it took a nearly $1.5B write-down in 2023.
Goldman Chief Financial Officer Denis Coleman said in an analyst conference call that the company would continue to sell down its equity investments in 2024 but would be careful about exiting loan positions where it has good relationships with clients that could be weakened by asking for its money back too quickly.
In its asset management business, Goldman has about $27B of real estate assets under management, and the division produced record management fees in 2023.
Goldman declined to comment.
