Outgoing Whitehall Head Warned of Goldman’s Over-Exposure

On Nov. 6, at a Real Estate Board of New York event open to the press, Stuart Rothenberg, the 45-year-old, soon-to-retire head of Goldman Sach’s Whitehall Fund, publicly warned of the firm’s exposures to commercial real estate. According to Bloomberg:

Goldman had increased its equity stakes in the Whitehall fund family it manages and had invested more of its own balance sheet in commercial property when markets were booming, Rothenberg told the Real Estate Board of New York on Nov. 6 .

"The firm was, for all intents and purposes, almost an enlarged hedge fund for the past couple of years, where the more (investing) we could do on balance sheet and the less we could do in the funds, the more we did," he said.

…Rothenberg, 45, told his audience that beyond Whitehall, Goldman had been increasing its direct exposure to real estate through principal investments, which means putting its own balance sheet at risk.

…"The firm used to be 15 percent of the capital in each fund, then 20 percent of the capital in each fund, and then over the past few years it had been about 35 percent of the capital in each fund," Rothenberg said.

Goldman invested more than $8 billion in real estate during the market peak of the past two years, according Bloomberg, including its more than $1 billion purchase of Las Vegas’ American Casino & Entertainment Properties (owner of the Stratosphere casino) from Carl Icahn in February, well into the credit crisis.

Goldman is expected to announce $2 billion in losses in its fourth-quarter results, in part due to its real estate exposures, according to the Wall Street Journal.

Mr. Rothenberg told the REBNY audience that the firm plans to refocus its energies and $6 billion in equity on distressed real estate assets.