It’s easy to get all hot under the collar when discussing Goldman Sachs. You remember Goldman, right? Back in 2006, the firm began to hedge its exposure to home loans and managed to get rid of all of its mortgages and mortgage-backed securities before the bottom fell out of the subprime market. As a result, Goldman actually manage to make money when the meltdown took place while countless other firms lost millions or even went bankrupt.
Although we can argue until we are blue in the face regarding whether the firm is simply filled with savvy investors with an excellent understanding of the marketplace or it played an integral roll in causing the meltdown to occur, one thing is clear: when Goldman takes action, all eyes are watching. As such, it is worth taking notice of the most recent actions the firm has started to take.
According to reports, Goldman owes $6.4 billion in commercial mortgage loans and that it is holding onto about $1.6 billion in commercial mortgage-backed securities. The interesting part? The company has recently reported that it has reduced the value of its commercial mortgage portfolio by almost half. Other banks have been far less aggressive, but the question begs to be answered – is Goldman once again a step ahead of the rest in predicting that many commercial real estate borrowers are poised to default?
Unfortunately, the answer isn’t so simple to find. After all, Goldman currently has a $950 billion balance sheet, which means it can afford to be at the helm when it comes to marking down loans. By doing so, the firm puts pressure on other lenders to do the same, which could put the firm back into position to make a significant money from commercial real estate in much the same way it did with residential real estate.
Of course, no one at Goldman is talking, so we will all just have to sit back, wait and see how it all pans out in the end.
Eric Bramlett is the broker & co-owner of One Source Realty, a boutique Austin real estate company. He has been a full time real estate professional since 2003. Eric currently works with select buyers & sellers, manages his Austin condos guide, and his Austin real estate blog.