Thursday, 19 April 2012

Goldman Executives Reappear on Real Estate Scene

There was a time when Goldman Sachs‘s real estate investment arm was one of the banking giant’s crown jewels. The unit, which largely operates under the Whitehall brand, raised billions of dollars, earning profits for the firm’s partners and investors.

But then the financial crisis struck. The Whitehall funds, which had aggressively invested at the top of the real estate market, suffered enormous losses. Goldman has largely dismantled its Whitehall team and no current plans to raise another fund, according to people briefed on the firm’s strategy.

Where has Whitehall’s leadership gone? A check of the headlines this week shows that — please excuse the cliché — there are second acts in private equity real estate investing.

On Thursday, the private equity firm Kohlberg Kravis Roberts announced its first real estate investment in the United States. The firm closed on a roughly $200 million investment in Yorktown Center, a Chicago-area mall, purchasing the property with several co-investors.

Leading the deal was Ralph Rosenberg, a former co-head of Goldman’s Whitehall unit, who K.K.R. hired last year to head its new real estate effort. Mr. Rosenberg left Whitehall in 2004, before much of its problems arose. He headed another Goldman investment for two years before leaving in in 2006.

K.K.R., along with the other large, publicly traded private equity firms, are pushing into new businesses to diversify their revenues. In real estate, K.K.R. (as well as Apollo Global Management, another big firm with a nascent property-investing business) is playing catchup to the Blackstone Group, the dominant private equity real estate investor. Blackstone manages about $37 billion in real estate funds.

Another firm trying to build a real estate investment business is AllianceBernstein. The money manager, whose chief executive, Peter Kraus, is a former Goldman banker, announced Wednesday that it closed its first private equity real estate fund with commitments of $680 million.

Co-heading AllianceBernstein’s fund is Brahm Cramer, a longtime Goldman partner and former co-head of its Whitehall group. He is running the fund with Jay Nydick, the former president of real estate company iStar Financial. Working closely with Mr. Cramer at AllianceBernstein is Adam Brooks, who led Goldman’s real estate mezzanine investing arm.

In a statement, Mr. Cramer said, “As a first time fund, we are thrilled with the success of our capital raise within a very difficult fundraising environment.”


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