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Goldman Sachs to Report Markdowns on Commercial Real Estate Holdings
Real Estate

Goldman Sachs to Report Markdowns on Commercial Real Estate Holdings

As the market struggles with rising interest rates, Goldman Sachs CEO David Solomon announced that his bank will reveal markdowns on its holdings in commercial real estate.

The New York-based company would report impairments on loans and equity investments connected to commercial real estate in the second quarter, Solomon told Sara Eisen of CNBC. Financial institutions recognize write-downs that have an impact on quarterly profits due to loan defaults and declining valuations.

“There’s no question that the real estate market, and in particular commercial real estate, has come under pressure,” he said. Adding that, “You’ll see some impairments in the lending that would flow through our wholesale provision this quarter.”

The sector is undergoing a hard transition to higher borrowing costs and decreased occupancy rates as a result of the shift to remote work after years of low interest rates and high valuations for office buildings. Instead of refinancing their loans, several property owners have sold their possessions. Defaults have just recently started to appear in banks' results. According to Solomon, Goldman reported impairments on real estate loans totaling over $400 million in the first quarter.

As Goldman increased its alternative investments during the past ten years, it added direct real estate investments to its lending business, according to Solomon.

“We think that we and others are marking down those investments given the environment this quarter and in the coming quarters,” Solomon said.

While the write-downs are “definitely a headwind” for the bank, they are “manageable” in the context of Goldman’s overall business, he said.

However, smaller banks can find them more challenging to administer. According to Solomon, regional and midsize institutions are the ones who originate about two-thirds of the loans in the sector.

“That’s just something that we’re going to have to work through,” he said. “There’ll probably be some bumps and some pain along the way for a number of participants.”

The resilient nature of the American economy "surprised" Solomon in the in-depth interview, and he noted the emergence of "green shoots" following a period of muted capital market activity.

See also:
Aurum PropTech to acquire NestAway for $20M
SSPL Group unveils The Strand Square: Luxury Workspaces in Pune


As the market struggles with rising interest rates, Goldman Sachs CEO David Solomon announced that his bank will reveal markdowns on its holdings in commercial real estate. The New York-based company would report impairments on loans and equity investments connected to commercial real estate in the second quarter, Solomon told Sara Eisen of CNBC. Financial institutions recognize write-downs that have an impact on quarterly profits due to loan defaults and declining valuations. “There’s no question that the real estate market, and in particular commercial real estate, has come under pressure,” he said. Adding that, “You’ll see some impairments in the lending that would flow through our wholesale provision this quarter.” The sector is undergoing a hard transition to higher borrowing costs and decreased occupancy rates as a result of the shift to remote work after years of low interest rates and high valuations for office buildings. Instead of refinancing their loans, several property owners have sold their possessions. Defaults have just recently started to appear in banks' results. According to Solomon, Goldman reported impairments on real estate loans totaling over $400 million in the first quarter. As Goldman increased its alternative investments during the past ten years, it added direct real estate investments to its lending business, according to Solomon. “We think that we and others are marking down those investments given the environment this quarter and in the coming quarters,” Solomon said. While the write-downs are “definitely a headwind” for the bank, they are “manageable” in the context of Goldman’s overall business, he said. However, smaller banks can find them more challenging to administer. According to Solomon, regional and midsize institutions are the ones who originate about two-thirds of the loans in the sector. “That’s just something that we’re going to have to work through,” he said. “There’ll probably be some bumps and some pain along the way for a number of participants.” The resilient nature of the American economy surprised Solomon in the in-depth interview, and he noted the emergence of green shoots following a period of muted capital market activity. See also: Aurum PropTech to acquire NestAway for $20M SSPL Group unveils The Strand Square: Luxury Workspaces in Pune

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