GOLDMAN Sachs’s alternatives business raised US$3.6 billion for its latest real estate credit fund, giving it firepower at a time of market dislocation.
That figure eclipses the roughly US$2.6 billion that Goldman raised from third-party investors for a predecessor vehicle and marks the largest pool of capital the firm has amassed for the effort.
Some banks have pulled back from commercial real estate lending, leaving certain landlords struggling to secure financing in this era of higher interest rates.
“The strategy really is to capitalise on what we think is a growing supply-and-demand gap for real estate debt financing,” Richard Spencer, chief investment officer for real estate credit at Goldman Sachs Alternatives, said on Monday (May 13).
The bank is also investing US$1.4 billion of balance sheet capital alongside the fund, known as West Street Real Estate Credit Partners IV, which will be amplified with around US$2 billion in leverage, giving it a lending capacity of more than US$7 billion, according to sources with knowledge of the matter who asked not to be identified citing private information. The vehicle is targeting returns of around 10 to 12 per cent after fees, the sources said.
The new fund will seek to originate, underwrite and hold loans backed by high-quality real estate, Spencer said. Through the vehicle, Goldman will aim to make first-lien mortgages secured by what it describes as “transitional” real estate, or properties undergoing refurbishment, a change of use or even development. The fund will also seek to provide mezzanine financing related to leased and stabilised properties.
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The vehicle has already committed more than US$1.8 billion, said Spencer and Jim Garman, global head of real estate at Goldman Sachs Alternatives, without providing specific details on those investments.
Goldman’s new fund will be able to invest in Organization for Economic Cooperation and Development countries in the Asia-Pacific region, a broader remit than its prior fund’s focus on North America and Europe. It will focus efforts in the region on Australia, in part because of the country’s strong creditor protections as well as regulatory pressure on traditional lenders to reduce risk, Spencer said.
The firm, which has provided commercial real estate loans in cities such as New York and Paris, may focus on lending against residential, industrial, hospitality and select office properties that are benefiting from shifts in technology, demographics and sustainability, Spencer said.
Sovereign wealth funds, insurance companies, pension plans, family offices and wealth-management clients backed the vehicle, according to the bank, which declined to provide more details. BLOOMBERG
