Financial Services Association, May 14 (Editor Zhou Ziyi) Goldman Sachs Group's alternative investment business announced the latest news on Monday (May 13). Its real estate credit fund “West Street Real Estate Credit Partners IV (West Street Real Estate Credit Partners IV)” and related investment platforms have completed the final round of fundraising.

According to the report, Goldman Sachs raised 3.6 billion US dollars for this newest real estate credit fund. This scale not only exceeded the target, but also marked the largest fund-raising scale for this series of funds to date.

Institutional investors participating in this strategy include sovereign wealth funds, insurance companies, US and international pension plans, etc. The Family Wealth Office, Goldman Sachs Private Wealth Management, and third party wealth management companies also form important sources of funding for the fund.

Furthermore, according to people familiar with the matter revealed to the media, Goldman Sachs Bank also injected an additional 1.4 billion US dollars into the “West Street Real Estate Credit Partner Phase IV Fund” from its balance sheet, plus the fund's additional leverage of about 2 billion US dollars, which made its total loan capacity more than 7 billion US dollars.

Real estate credit opportunities

The raise comes at a time when the global real estate market is in turmoil. As some banks gradually withdraw from the commercial real estate loan business, real estate project owners are finding it increasingly difficult to obtain financing in this era of rising interest rates.

Goldman Sachs, on the other hand, “sniffed” an opportunity from the real estate credit sector at this point. Richard Spencer, chief investment officer in charge of real estate credit at Goldman Sachs Alternative Investments, said in an interview with the media on Monday that there is a clear imbalance between capital supply and demand in the real estate industry, and the gap is getting bigger and growing, and Goldman Sachs has seen important real estate credit business opportunities.

Regarding the new fund, Spencer explained that the fund will initiate, underwrite, and hold loans backed by high-quality real estate. Through this tool, Goldman Sachs will aim to provide first lien mortgages secured by “transitional” real estate.

What Goldman Sachs calls “transitional” real estate refers to real estate that is being renovated, repurposed, or even developed. Additionally, the fund will seek to provide mezzanine financing related to leasing and stabilizing property.

According to people familiar with the matter revealed to the media, the goal of the fund is to return around 10% to 12% after deducting fees.

As one of the world's leading alternative investors, Goldman Sachs manages more than $450 billion in assets. Among them, Goldman Sachs Alternative Investment's real estate team consists of more than 250 professionals, has offices in 11 countries, regions, and 19 cities around the world, and has invested more than 60 billion US dollars since 2012.

An investment of 1.8 billion US dollars has been promised

Richard Spencer and Jim Garman, head of global real estate at Goldman Sachs Alternative Investments, said the fund has now promised to invest more than $1.8 billion in eight projects around the world, but they have not provided specific details on these investments.

It is reported that this new fund will be able to invest in countries of the Organization for Economic Cooperation and Development (OECD) in the Asia-Pacific region, which is broader than its previous fund focused on North America and Europe.

Spencer also stated that the fund will focus its work on the Australian region, in part due to the country's strong protections for creditors.