Wall Street titan launches largest-ever fund for transitional commercial properties
While other banks have been pulling back from commercial real estate lending, Goldman Sachs Group has injected billions of dollars into the market through a new real estate credit fund.
The Wall Street firm’s alternatives business has raised $3.6 billion from third-party investors for the fund, West Street Real Estate Credit Partners IV. This exceeds the roughly $2.6 billion raised for the predecessor fund, making it the largest pool of capital Goldman has gathered for this effort.
The move comes as many landlords struggle to secure financing due to higher interest rates and reduced lending from traditional banks.
Read more: Commercial, multifamily originations stall as owners hold off on major moves
Goldman Sachs aims to capitalize on this “growing supply-and-demand gap for real estate debt financing,” according to Richard Spencer, chief investment officer for real estate credit at Goldman Sachs Alternatives.
In addition to the $3.6 billion raised from external investors, Goldman is investing $1.4 billion of its own capital alongside the fund. When combined with around $2 billion in leverage, the vehicle will have over $7 billion in lending capacity, according to Bloomberg, citing people familiar with the matter.
The fund targets returns of 10-12% after fees and will focus on originating and holding first-lien mortgages secured by “transitional” properties undergoing changes like refurbishment or development. It will also provide mezzanine financing for leased stabilized assets.
While the previous fund focused on North America and Europe, the new one will have a broader reach, including OECD countries in the Asia-Pacific region. Australia is an area of focus due to the country’s “strong creditor protections and pressure on traditional lenders to reduce risk.”
Jim Garman, global head of real estate at Goldman Sachs Alternatives, noted the fund has already committed over $1.8 billion to investments, though specific details were not provided.
According to Goldman, the fund’s investors include sovereign wealth funds, insurance companies, pension plans, family offices and wealth management clients.
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