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Goldman Sachs Sets $7B for Real Estate Lending Following Record Fundraising

The bank injected an additional $1.4 billion from its balance sheet. Fund’s lending capacity exceeds $7 billion including leverage.

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Good morning. Goldman Sachs (GS) raised $3.6B for its latest real estate credit fund, bringing its total lending capacity to over $7B. Plus, Yardi reveals the top 10 markets for self-storage transactions in 2023.

Today’s issue is brought to you by BV Capital.

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STRONG CREDIT

Goldman Sachs Raises $3.6B for Real Estate Debt Fund

Goldman Sachs is stepping up as traditional lenders step back, injecting $7B into a new real estate credit fund. The bank’s latest fundraising makes it the largest pool of capital Goldman has gathered for this effort.

Record fundraising: Dubbed West Street Real Estate Credit Partners IV, the bank has raised its lending capacity to over $7 billion. The fund combines $3.6 billion from external investors with $1.4 billion of the bank's capital, alongside approximately $2 billion in leverage.

Investor confidence: The $3.6 billion from external investors was supported by diverse investors, including sovereign wealth funds, insurance companies, and family offices. Goldman Sachs aims to achieve returns of 10% to 12% after fees, reflecting the high-yield potential of the targeted investments.

Global expansion: Unlike previous funds focused solely on North America and Europe, West Street Real Estate Credit Partners IV plans to expand its reach to include OECD countries in the Asia-Pacific region, particularly Australia. The fund will focus on residential, industrial, hospitality, and select office sectors, adapting to trends in technology, demographics, and sustainability.

Between the lines: Amid tightening credit conditions and higher interest rates, which have left many landlords seeking alternative financing solutions, Goldman Sachs is positioning this fund to exploit the widening gap in real estate debt financing. This move aims to support properties in transition, such as those undergoing refurbishments or developmental changes, by providing first-lien mortgages and mezzanine financing for more stabilized leased assets.

➥ THE TAKEAWAY

Why it matters: With traditional banks retreating due to valuation and interest rate concerns, alternative lenders like Goldman Sachs are filling the void. With its new $7B fund, Goldman has become one of the largest players in this space and capitalizes on the growing demand for financing, particularly in distressed properties. In Q1, private lenders originated nearly half of all commercial real estate mortgages, according to CBRE.

TOGETHER WITH BV CAPITAL

New Texas Multifamily Properties in High-Demand

BV Capital is developing the ‘“Landhaus at Greune,” a multifamily property in the high-growth San Antonio suburb of New Braunfels. This farmhouse-style property offers 356 ”Class A” units and exceptional amenities that will set the standard in the local market.

BV Capital expects a supply-demand imbalance to materialize in the Texas multifamily market come 2025.  Projects that manage to get off the ground now, like Landhaus at Gruene, will be there to meet that demand — and even benefit from higher rental rates.

This deal is only available through a private placement memorandum and is limited to accredited investors.


✍️ Editor’s Picks

  • Fundraising frenzy: Brookfield Asset Management (BN) reported its best Q1 fundraising ever, raising $20B over numerous funds, including for private credit and insurance solutions.

  • Speed bumps ahead: Marcus & Millichap (MMI) reported that pandemic-related disruptions have led to market challenges in Q1, including higher hiring turnover.

  • Inflation nation: According to an April NY Fed survey, American consumers expect 3.3% inflation and, coincidentally, 3.3% higher home prices, too.

  • Not so fast: Upscale grocery chain Erewhon sued LA to prevent the conversion of a neighboring hotel into a 520-unit apartment building, alleging a lack of environmental study.

  • Substitute lenders: Global lenders like Brookfield, M&G, Schroders, Aviva, and AXA are swooping in to fill the property loan gap after US banks began embracing tighter CRE lending standards.

🏘️ MULTIFAMILY

  • Distress leader: Rising interest rates continue to impact US multifamily housing, which surged in CRED iQ’s latest distress rankings, followed closely by retail.

  • Turnover trends: To combat sluggish rent growth, apartment owners rely on resident turnover to achieve double-digit rent growth, aiming for new leases in every market.

  • Reviving Long Beach: JPI acquires a site at Mosaic in Long Beach with 272 apartments, 16 affordable units, and 150KSF of prime retail space for shops and restaurants.

  • Get ‘em while they’re young: The student housing sector matched last year's record leasing pace with 5.5% YoY rent growth in April or $895 per bed.

  • Multifamily mayhem: According to RealPage, nearly 672K apartment units are expected to hit the markets in 2024, the highest levels we’ve seen since 1974.

🏭 Industrial

  • Bigger in Texas: Velocis, a Dallas-based private equity real estate fund, plans to raise $500M for industrial investments in Texas to better focus on middle-market tenant demand.

  • Denton delight: Urban Logistics Realty sold Urban District 35, a 440.7KSF industrial park in Denton, TX, to High Street Logistics Properties.

  • Tucson trade: Flint Development sold the 91%-leased, 806.6KSF Tucson Commerce Center to two buyers, including Bridge Investment Group, for $118.7M.

🏬 RETAIL

  • Retail outlook report: In Q1, retail demand continued to outpace supply as leasing activity fell, with retailers searching for smaller spaces below 2.5K SF, according to JLL’s latest report.

🏢 OFFICE

  • Bain's big move: Bain & Co. (BCSF) signed a 235.2KSF lease at 22 Vanderbilt in NYC, doubling its existing space and shaking up the city’s somewhat stagnant office market.

  • Grand reopening: NY-based Milstein Properties secured 5 new tenants, leasing over 460KSF at the rebranded 22 Vanderbilt, which is now 91% occupied.

  • Tower troubles: After legal disputes and plenty of graffiti, Oceanwide Plaza's bankruptcy sale, managed by Colliers and Hilco Real Estate, promises to be an orderly process. Hopefully.

🏨 HOSPITALITY

  • Hotel boom: Texas hotel development is booming, with 16K keys in the 2024 pipeline, led by Dallas. Intercontinental Hotels Group (IHG) is also adding 11K keys this year to the Lone Star State.

  • Condo clash: An Epic Hotel & Residences lawsuit alleges billionaire Amancio Ortega’s Miami waterfront “condo-hotel” unlawfully controls common areas and approves illegal assessments.

  • On second thought: Varde Partners unloaded the 51-unit Kayak Miami Beach hotel to NY-based Blue Suede Hospitality Group for $12.8M after buying it for $13.6M less than a month ago.

📈 CHART OF THE DAY

Top 10 Markets for Self Storage Transactions in 2023

Source: Yardi

According to Yardi Matrix, the top US metros for self-storage deals in 2023 were NYC ($281M), White Plains in NY ($209M), Phoenix ($189M), Tampa ($121M), and Charleston in SC ($118M). Nationwide self-storage sales fell 64% YoY to $3.6B from $10B in 2022 and $13.8B in 2021.


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