Goldman Sachs Alternatives Hits $3.4B Final Close for Third Real Estate Secondaries Fund

The alternatives platform of Goldman Sachs Asset Management has reached the final close of its third real estate secondaries fund with total commitments of $3.4 billion, representing the firm’s largest-ever such vehicle.

Vintage Real Estate Partners III exceeded its fundraising target with backing from institutional and high-net-worth investors and a “meaningful commitment” from Goldman Sachs employees, the banking giant said Wednesday in a release. The VREP II fund had closed on $2.75 billion in commitments in 2020.

Secondaries acquire existing interests from limited partners or assets from primary fund investors. The current market environment presents one of the most compelling deployment opportunities in the segment, said Harold Hope, global head of vintage strategies at Goldman Sachs Alternatives.

“As the largest dedicated real estate secondaries fund raised to date, VREP III will be well-positioned to capitalise on increasingly attractive opportunities, in a market where size is a meaningful competitive advantage,” Hope said.

Easing Exits

The new fund will help ease a challenging exit environment for limited and general partners in private real estate funds amid a recent slowdown in distributions, according to Goldman. Rising interest rates have also steered market participants towards secondaries as an alternative liquidity solution, the firm said.

The latest milestone comes after Goldman Sachs Alternatives last month announced the final close of West Street Real Estate Credit Partners IV and related vehicles with more than $7 billion in real estate lending capacity including leverage.

RCEP IV has committed more than $1.8 billion across eight investments globally, as the firm seeks to address what it calls a growing supply-demand imbalance in the market for real estate credit.

Also in May, Goldman revealed that it had raised more than $20 billion for senior direct lending with the final close of its West Street Loan Partners V. The vehicle aims to take advantage of an expected pickup in M&A activity as private equity dry powder hits an all-time high and sponsors seek to return capital to investors.

In 2023, Goldman reached a final close for its Vintage IX and Vintage Infrastructure Partners, raising a combined $15.2 billion for the two private market secondaries funds.

Blackstone, Ares Vehicles

The same forces driving Goldman’s secondaries push have inspired rival vehicles launched by private equity heavyweights Blackstone and Ares Management.

Blackstone last November announced the $2.6 billion final close of its latest real estate secondaries fund, dubbed Strategic Partners Real Estate VIII, and related programme vehicles, while Ares in December disclosed $3.3 billion in committed capital for secondaries under its Landmark Real Estate Fund IX.

Real estate secondaries transaction volume — which CBRE IM estimates at 1 to 2 percent of the market — could grow to between 2 and 3 percent of the $1.026 trillion in unrealised value in private real estate funds and the more than $816 billion in non-fund structures, the investment manager said in an April report.