Senior exits call Goldman’s real estate ambitions into question

Following a new round of leadership changes, the bank’s plans to recapture its former glory in the asset class are back in the spotlight.

When Goldman Sachs Asset Management was interviewed for PERE’s October 2022 cover story, the banking giant’s return to private equity real estate investing appeared on solid footing.

The three executives who ran GSAM’s global property business – head of Americas Gaurav Seth, head of EMEA James Garman and head of Asia-Pacific Takashi Murata – were fresh off a successful $3.5 billion closing for its core-plus, value-add Real Estate Investment Partners program.

The vehicle represented the bank’s comeback real estate equity fund; it was the first such capital raise since its once preeminent but ultimately ill-fated Whitehall Street fund series which last had a closing just before the global financial crisis.

The three executives had good reason to be optimistic about the bank’s ambitions to scale its third-party real estate equity fundraising after a decade of generating strong returns investing on the company’s balance sheet. On the agenda was fundraises including the firm’s first post-Whitehall real estate opportunistic vehicle.

Fast forward to today, and onlookers cannot be blamed for asking questions of Goldman Sachs’s real estate business. As PERE reported this week, Seth and Murata have both decamped for private equity heavyweight Warburg Pincus. Garman, who had served as global co-head with Murata, has now been named the sole global head, with former deputies Richard Spencer and Nikhil Reddy elevated to EMEA and APAC heads, respectively.

While Garman, Murata and Seth are long-time Goldman veterans, the three-pronged leadership structure itself had also been recently created. It was one outcome from the merging of the bank’s merchant banking division, of which Garman was co-head, and special situations group, where Seth and Murata were partners, into GSAM as part of a wider restructuring that began in 2019 and involved integrating all of the bank’s alternatives businesses.

This set-up was still in the early days of the bank engaging with third-party institutional capital. So another reshuffling of the senior management team within such a short period of time raises questions about the stability of the platform and the viability of its ambitions in an asset class where the bank was once a dominant presence.

Senior departures elsewhere at the bank, including the impending exit of GSAM chief investment officer Julian Salisbury, do not help the optics of the matter either.

Jeff Fine, global head of real estate client solutions, maintained it was business as usual for GSAM’s real estate team. “All our plans in terms of the destination for this business remain completely intact,” he told PERE this week. “The market condition [is] what it is – we revisit every day strategically as a business where we think the best opportunities are and what the best ways are to capitalize them – but the firm’s desire to move into a third-party capital orientated business, a client-focused business with the firm continuing to invest our own balance sheet with clients is still entirely the direction of travel.”

As one of the world’s largest banks, Goldman Sachs can always rely on the power of its blue-chip name to open doors in the institutional investor world in which it is hoping to make deeper inroads. Having a senior bench of real estate executives who have spent most of their careers at Goldman is another strong selling point.

It still has both despite the recent leavers. But any shakeup in senior management will always prompt questions from existing and prospective investors. They will be keen to see less top-level attrition going forward if they are to believe the bank’s best days in private real estate are ahead.