Goldman Sachs Fantastic Earnings - Except in CRE

GS earnings jumped 65% last quarter, except in its commercial real estate portfolio where it booked a loss of $499 million from its “real estate principal investments.” This branch of Goldman’s business allows clients to co-invest with Goldman through its Whitehall real estate funds.

As reported in the WSJ, Whitehall funds have been bruised by the economic downturn. In May, one Whitehall fund spent some $3.7 billion between May 2007 and August 2008 to buy a portfolio of casinos, hotels and office buildings and subsequently had to write down those investments by $2.1 billion.

The "real estate principal investment" component of Goldman’s earnings report only reflects its own equity in the Whitehall funds, but beyond that private equity real estate loss, the firm also had some $700 million in commercial real estate mortgage write downs during the last quarter.

Even Goldman is having difficulty in CRE.