Goldman Sachs Group Inc.’s alternatives arm has successfully raised $3.6 billion for its latest real estate credit fund, positioning itself with substantial capital amidst current market uncertainties.
This achievement surpasses the approximately $2.6 billion garnered from third-party investors for a previous fund, marking a significant milestone for the firm.
With some banks retreating from commercial real estate lending, many landlords face challenges in securing financing amid rising interest rates.
Richard Spencer, Chief Investment Officer for Real Estate Credit at Goldman Sachs Alternatives, explained in an interview on Monday that the strategy is to capitalize on the widening gap between supply and demand for real estate debt financing.
In addition to external investment, the bank is injecting $1.4 billion of balance sheet capital into the fund, known as West Street Real Estate Credit Partners IV, which will be further bolstered with approximately $2 billion in leverage. This allocation provides a lending capacity exceeding $7 billion, aiming for returns of 10% to 12% post fees.
The fund’s focus is on originating, underwriting, and holding loans backed by high-quality real estate, particularly targeting first-lien mortgages secured by transitional properties undergoing refurbishment, change of use, or development. It will also provide mezzanine financing for leased and stabilized properties.
While specific details on investments are not disclosed, the fund has already committed over $1.8 billion.
Expanding its geographical scope, Goldman’s new fund can invest in Organization for Economic Cooperation and Development (OECD) countries in the Asia-Pacific region, particularly focusing on Australia due to its robust creditor protections and regulatory incentives.
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By Proptechbuzz
By Ravi Kumar
