Goldman Sachs has raised its biggest capital yet for its latest real estate credit fund as rivals pull back.
The Wall Street giant has raised $3.6 billion from third-party investors for the fund, known as West Street Real Estate Credit Partners IV. The bank is also investing $1.4 billion from its own balance sheet capital, Bloomberg reported.
The fund will be leveraged at about $2 billion and have a total lending capacity of more than $7 billion. Goldman Sachs executives told Bloomberg that the bank has already committed to lending more than $1.8 billion. Bisnow was first to report that the bank was raising capital for the fund.
The fund aims to earn 10-12% returns after fees and differs from the Manhattan-based investment bank's previous real estate funds in that it will expand its reach from North America and Europe to include Organization for Economic Cooperation and Development (OECD) countries in the Asia-Pacific region.
Goldman plans to use the new fund to originate, underwrite and hold loans secured by high-quality real estate. The bank aims to offer first-lien mortgages secured by properties in transition, such as those being renovated, repurposed or developed. It also aims to offer mezzanine financing tied to rental properties and other stabilized properties.
The investment fund was backed by sovereign wealth funds, insurance companies, pension funds, family offices and the bank's asset management clients.
The fund was launched as other banks pull back from real estate lending amid concerns about property prices, inflation and interest rates, while alternative lenders are increasingly turning to real estate debt, betting on a recovery in distressed properties.
Private lenders originated nearly half of all commercial real estate mortgages in the first quarter, according to CBRE. As banks' share of CRE mortgages fell to 23% between January and March from 41% in the first quarter of 2023, private lenders have overtaken banks to become the sector's primary lenders.
“The strategy is to take advantage of what we believe is a widening supply-demand gap in real estate debt financing,” Richard Spencer, chief investment officer for real estate credit at Goldman Sachs Alternatives, told Bloomberg.