- Goldman Sachs and Principal Real Estate have filed to raise capital through nonlisted REITs focused on originating and buying real estate loans.
- Commercial real estate debt investment has gained traction, with fundraising jumping from $2.3B in Q1 to $9.1B by Q2 (up nearly 4x).
- Nonbank lending continues to fill the gap as traditional banks and lenders tighten their focus on liquid, stabilized assets.
As reported in CoStar, Goldman Sachs (GS) and Principal Real Estate Investors (PGZ) are joining other major institutional investors in launching nontraded REITs. They’re aiming to take advantage of opportunities in CRE lending as traditional lenders keep pulling back.
Focused on Lending
Both firms have filed paperwork with the Securities and Exchange Commission to raise capital for real estate credit-focused funds: Goldman Sachs Real Estate Finance Trust and Principal Credit Real Estate Income Trust.
Unlike previous REIT offerings that targeted property acquisitions, these new funds will focus on originating and purchasing property loans.
With property valuations close to bottoming out, Goldman Sachs and Principal are positioning themselves to capture future lending opportunities, capitalizing on the ongoing demand-supply imbalance in real estate credit.
Growing Trend
Nontraded REITs have become a popular way for large institutional investors to raise capital for real estate projects.
Recent launches by firms like JPMorgan Chase (JPM), Fortress Investment Group, and Morgan Stanley (MS) highlight the growing focus on real estate investment opportunities, particularly in debt markets.
According to Preqin, real estate debt funds raised $9.1B in the second quarter of 2024, compared to $2.3B in the first quarter, showing increasing investor appetite for these types of investments.
Why Now?
As traditional lenders like banks tighten their exposure to real estate loans, nonbank lenders are stepping in.
Goldman Sachs highlighted that many banks are setting aside more capital to cover potential bad debts, reducing their willingness to finance transitional real estate projects. This has created a growing market for alternative lenders, like nontraded REITs, that can offer higher-leverage loans.
Principal Real Estate also noted that borrowers would likely seek nontraditional lenders offering loans with higher loan-to-value ratios. With upcoming loan maturities, the demand for alternative lending sources will remain strong.
