Real estate writedowns spur Goldman Sachs’ $1B loss

Firm reported $485M impairment charge related to real estate investments

Goldman Sachs' David Solomon (Photo Illustration by Steven Dilakian for The Real Deal with Getty)

Goldman Sachs’ David Solomon (Photo Illustration by Steven Dilakian for The Real Deal with Getty)

Goldman Sachs took a billion-dollar hit in the second quarter, with real estate partially to blame.

The bank reported $1.15 billion in losses during the most recent financial quarter, Bloomberg reported. Writedowns on some of the firm’s $14 billion in real estate investments helped drive the quarterly losses.

The company didn’t specify which properties were most responsible for the losses, but was sure to note in its earnings presentation that the beleaguered office market only accounted for a small share of its property investments. The firm did reveal a $485 million impairment charge related to its real estate bets.

The bank’s chief financial officer told analysts there was a “comprehensive asset-by-asset” review of the commercial real estate portfolio, adding that no single bet represents a particularly large stake for Goldman.

Goldman did signal a desire to shift away from commercial real estate, despite not being one of the biggest lenders in the category in the first place. It stated roughly half of the bank’s alternative commercial real estate investments are of a historical nature that Goldman “intends to exit over the medium term.”

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The bank’s commercial real estate portfolio is considered 42 percent investment-grade and reported a 0.3 percent charge-off rate. Of the bank’s $178 billion in loans, only $27 billion are from commercial real estate, paced by $11 billion in the industrial sector.

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Overall, Goldman posted a profit of $1.22 billion in the second quarter, down from $2.93 billion during last year’s second quarter, the Wall Street Journal reported. Revenue also dropped by 8 percent, landing at $10.9 billion in the second quarter.

The bank’s per-share earnings were $3.08, eight cents off of what analysts forecasted for the bank. In missing those expectations, Goldman became the only one of the six biggest banks in the nation to fall short of what was anticipated, though Citigroup and Morgan Stanley also saw profits fall.

Holden Walter-Warner