Friday, May 29, 2009
Goldman SACKS, Its Clients?-2
"One of Goldman Sachs Group Inc.'s [GSG] premier real-estate funds is in discussions with its lenders to restructure debt on some of its biggest investments: Nevada casinos, German office buildings and a US hotel chain. The wrinkle: One of the main lenders on those deals is [GSG]. ... With commercial real-estate values plunging, investors and their advisers have begun focusing on the conflicts. They say that [GSG] is able to use its position as investor, lender and fee-collector to benefit itself at the expense of outsiders. ... But all wasn't lost for [GSG]. During 2008, [GSG] made at least $88 million in fees for arranging financing for Whitehall 2007 deals, plus an additional $30 million in advisory fees, and $19 million in property-management fees, according to documents for the first, second and fourth quarters of the year that were reviewed by the [WSJ]. ... Such high fees at a time of poor performance have upset some outside investors in the fund. Some of its investments were made at the top of the market prices when analysts including some at [GSG] were already warning of looming problems facing commerical real estate. Adding to the discord: [GSG] offered to buy out its employees' interest in the fund at a discount to net asset value late last year, weeks before further marking down the equity value of the fund. Outside investors didn't get that offer. ... [GSG] is in an especially tricky position when acting as both a borrower and lender to itself, critics say. Concesssions granted by Whitehall may benefit [GSG], the lender, at the expense of Whitehall investors, the critics add. ... [Andrea] Raphael, the [GSG] spokeswoman, said Whitehall 'formed an independent investment advisory committee comprised of significant outside investors who are asked to approve certain transactions that involve other parts of the firm'," my emphasis, Anton Troianovski and Linging Wei at the WSJ, 13 May 2009.
Why does GSG still have clients? This reminds me of my 16 December 2007 post: http://skepticaltexascpa.blogspot.com/2007/12/goldman-sacks-its-clients.html. Would GSG benefit itself at the expense of its clients? Anyone thinking this should be hung. Right Lloyd Blankfein?