Goldman raises more than double its target for RE secondaries fund

The firm's Vintage Real Estate Partners II is the third-largest RE secondaries fund yet raised.

Goldman Sachs Asset Management has held the final close on one of the largest real estate secondaries funds yet, sister publication Secondaries Investor has reported.

The New York-headquartered firm has collected $2.75 billion for Vintage Real Estate Partners II against a target of $1.25 billion, according to managing director and global head of private equity secondaries Harold Hope.

This places it third by size behind 2018-vintage Landmark Real Estate Partners VIII, which raised $3.3 billion, and Partners Group Real Estate Secondary 2017, which raised $2.9 billion, according to PERE data.

Limited partners viewed secondaries as a smart way to gain exposure to real estate at a late stage in the economic cycle, Hope said.

“When you invest in a real estate opportunities fund, they’re doing strategies that are much higher risk and return, like development, repositioning and buying land,” he said. “When you buy that fund on a secondary basis in year five, six or seven, it’s a very different risk profile.”

Predecessor Vintage Real Estate Partners, a 2016-vintage, raised $894 million, according to PERE data.

Fund II started investing in September and was around 10 percent funded by March. The covid-19 crisis has caused price dislocation in the GP-led restructuring market and Goldman sees opportunities in preferred equity as GPs seek capital to strengthen their portfolios, Hope said. The firm is also starting to see stressed sellers come to market with steeply discounted portfolios, he added.

“The way managers approach valuation and reporting – there’s a very big range in real estate because it is such a micro asset class,” said Sean Brenan, managing director and head of Goldman’s real estate secondaries business, noting that two identical assets in slightly different locations can have very different valuations.

“This is a challenge for real estate secondaries investors but is also one of the reasons this market is so compelling for incumbents.”

Real estate secondaries volumes reached a three-year high last year, according to data from Landmark. Some 127 transactions, representing approximately $7.2 billion of net asset value, closed or were placed under contract in 2019.