Whitehall continues expansion in face of fee criticism

A special report in PERE magazine reveals a secretive firm that is building out its franchise in Asia and Central and Eastern Europe. The real estate investment arm of Goldman Sachs’ fundraising prowess has been undeterred by some LPs who see a dizzying array of fees cutting into net performance.

Goldman Sachs' Whitehall Street private equity real estate platform has become one of the most dominant players in the global property investment world, raising more than $26 billion in real estate funds in the 17 years since it was first formed. It has closed some of the largest and most complicated deals around, yet it remains among the most opaque private equity real estate firms in the world.

The firm is extensively profiled in a special report published in the September issue of PERE magazine

Among the report’s revelations are that as Whitehall expands into Asia and Central and Eastern Europe, it continues to face criticism by some in the market that its fees weigh too heavily on its performance.

The article cites a PPM for the Whitehall Street Global Real Estate 2007 fund which does not present fund-level IRR information. Information from Private Equity Intelligence (or Preqin) an alternative investment data service, lists three Whitehall funds from vintage years 1997, 1998 and 2000 as having net IRRs below Preqin’s performance averages for those vintage years.

However as a former Whitehall professional argues in the report, investors who back Whitehall funds are buying into the vaunted Goldman Sachs franchise. “Goldman Sachs is the top investment bank, able to attract the best people and the culture of the firm has always been for areas to work together to create value based on the franchise,” he says.

The PERE magazine report draws on interviews with dozens of former Whitehall employees, LPs, advisors, lawyers and other market participants familiar with the firm.