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Goldman Sachs Reports Gains in Real Estate Investments

Revenue in Goldman’s Asset Management Division Jumps on Fewer Real Estate Markdowns
Goldman Sachs, with its New York headquarters shown above, reported fewer markdowns in its real estate investments in the second quarter. (CoStar)
Goldman Sachs, with its New York headquarters shown above, reported fewer markdowns in its real estate investments in the second quarter. (CoStar)
CoStar News
July 15, 2024 | 4:06 P.M.

Goldman Sachs recorded gains in real estate investments in its asset management division in the second quarter after the Wall Street bank took steps last year to address risks from commercial property and it closed a multibillion-dollar, real estate-targeted fund last month.

Net revenues in Goldman’s asset and wealth management division rose 27% to $3.88 billion in the second quarter compared to the same period a year earlier. Real estate investments were the primary driver, the New York-based company said.

“In the prior-year period, we had significant markdowns as we were an early mover in addressing real estate risk across our balance sheet,” Chief Financial Officer Denis Coleman said during a Monday morning conference call. “We don’t have as many write-downs in this year’s period.”

Coleman's comments indicate Goldman executives believe they took action before rival banks in addressing problematic commercial real estate loans. Last week, Wells Fargo reported wider losses in the second quarter related to office properties. JPMorgan Chase reported a higher level of net charge-offs in its commercial and investment banking business, about half of which were for office-property mortgages.

At Goldman, net revenue from equity investments, measured as a component within the bank's asset and wealth management division, was $292 million in the second quarter compared to a net loss of $403 million in the same period a year earlier. The increase “primarily reflected net gains from real estate investments compared with significant net losses in the prior-year period,” Goldman said in a statement.

In addition, net revenue from debt investments rose 51% to $297 million, “reflecting significantly lower net losses from real estate investments,” Goldman said.

Goldman did not break out detailed figures for its real estate investments and did not describe the types or geographic location of the investments.

The improved performance in Goldman’s real estate investing activities comes after the bank last month closed its $3.4 billion Vintage Real Estate Partners III fund, the Wall Street Journal reported on June 26. The new fund will target “stakes in private real-estate funds” and “can be used to acquire portfolios of real-estate fund stakes from institutional investors and to back deals instigated by fund managers seeking to offer liquidity to all limited partners in a given fund at once,” Goldman told the Journal.

In lending, Goldman’s holdings of commercial real estate loans fell 3.6% to $27 billion at the end of the second quarter. Residential real estate loans were little changed compared to a year earlier at $24 billion.

Goldman did not provide additional details on its real estate loan portfolios in a statement or during a conference call.

Bank of America, PNC Financial Services Group and Morgan Stanley are scheduled to report earnings Tuesday.

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