Goldman Sachs Closes on $7B Real Estate Credit Strategy

Goldman Sachs

Goldman Sachs’ offices are hosting a few more private credit discussions this year

Goldman Sachs has added Asia Pacific to the target geography for its latest real estate private credit fund, and aims to invest up to $7 billion in property lending opportunities globally as it announces a final close for the strategy.

The company’s alternatives division announced the closing for Goldman Sachs’ West Street Real Estate Credit Partners IV strategy on Tuesday, saying the vehicle came in above target and marked the largest to date in its series. The company attributed the above-expectation result to a growing need for private funding channels for property projects.

“The market for real estate credit is characterized by a material and growing supply and demand imbalance,” said Richard Spencer, chief investment officer for real estate credit at Goldman Sachs Alternatives. “We believe this is creating attractive opportunities for alternative lending sources that can provide size and certainty of execution to borrowers.

The fund aims to provide first-lien mortgages secured by refurbishment and development projects, according to a Bloomberg account citing Goldman Sachs sources, and has already committed more than $1.8 billion in funds across eight investments globally.

Investing Amid Disruption

Equity raised for the strategy totals $3.6 billion, according to the Bloomberg report, which Goldman Sachs alternatives unit sees providing it with the means to close deals in a time of market dislocation. The previous edition of the strategy had raised $2.6 billion from outside investors.

jim-garman

Jim Garman, global head of real estate at Goldman Sachs Alternatives

The company is also contributing $1.4 billion to the vehicle from its own balance sheet for the strategy, as Goldman Sachs leadership pointed to the firm’s ability to adjust its investment approach to market conditions.

“Consistent with our thirty-year history investing through multiple cycles, our real estate platform is designed to be dynamic in the face of changing conditions,” said Jim Garman, global head of real estate at Goldman Sachs Alternatives. “While our flagship equity strategies provide clients with access to differentiated opportunities across sectors and regions, with specific focus on assets benefitting from trends in technology, demographics and sustainability, credit has always been a critically important component of our product mix, particularly during periods of capital markets disruption.”

Capital raised for West Street Real Estate Credit Partners IV came from new investors, longstanding investors who increased allocations to the strategy, and significant investments from Goldman Sachs and its employees, the company said.

Institutional investors backing the strategy include sovereign wealth funds and insurance companies as well as US and international pension plans. Investors from family offices, Goldman Sachs’ private wealth division and third-party wealth channels also made significant commitments.

Private Credit in Vogue

While Goldman Sachs’ previous real estate credit vehicles have focused on North American and European opportunities, the company’s alternatives division now see opportunities in Asia Pacific.

“With the close of one of the largest pools of capital dedicated to this opportunity, we are excited to continue the Real Estate Credit Partners program’s long history of providing tailored and creative financing solutions to the world’s leading developers and owners of high-quality real estate in the US, Europe and Australia,” said Richard Spencer, chief investment officer for real estate credit with the alternatives unit.

The real estate credit fund was announced less than two months after Goldman Sachs teamed up with Abu Dhabi’s Mubadala Investment Company to establish a $1 billion partnership to invest in private debt opportunities across Asia Pacific, including real estate.