Whitehall Street International, Goldman Sachsâ international real estate investment fund, has lost almost all of its $1.8bn of equity following soured property investments in the US, Germany and Japan, according to the fundâs estimates. By the end of 2009, the fund was down to its last $30m, a paper loss of about 98 cents on the dollar, an annual report sent to investors last month said. The report said that Goldman was Whitehallâs largest investor, with a commitment of $436m. Last year, Goldman took a loss of $1.76bn from all its real estate principal investments. The Whitehall disclosure is the latest in a string of losses reported by bank-owned property funds that relied on debt, and it comes as the Obama administration is seeking to restrict banksâ investment in private equity funds. It was revealed earlier this week that Morgan Stanleyâs most recent $8.8bn international property fund will lose as much as two-thirds of its value. The Whitehall fund, raised in 2005, invested more than half its capital in the US, and was also heavily exposed to Germany. While the drop in property values was dramatic in these two countries, losses at the Goldman fund were exacerbated by its dependence on debt. The letter to investors acknowledges the ânegative impact of leveraged investing in a market in which estimated asset values have declined materiallyâ. âThe approach of lenders and regulatory agencies towards upcoming troubled debt maturity issues may meaningfully impact the fundâs ability to hold assets until markets recover or to sell select non-core assets in the near future,â the letter said. âMany banks have been unwilling or unable to extend credit or refinance without steep concessions or additional equity.â The Whitehall fund has a long life and is not set to end until 2014 at the earliest. So it is still possible that values will improve. âOur continued focus on restructuring opportunities within our portfolio will enhance the prospects for recovering equity for the fund and our investors,â the letter adds. The fund has distributed $45m, or 3 per cent of committed capital, to investors. Goldman was able to restructure the debt on several of the fundâs investments, including a $558m recapitalisation of Valencia, a Japanese real estate company. It also has restructured several investments in Germany, including a retail portfolio in Berlin. Goldman has handed the keys to creditors and locked in losses on other investments, including Daiwa House in Japan and several investments in Germany. The letter says that the fundâs financial statements received a qualified audit opinion for the year, though âthis does not affect our ability to execute the fundâs current strategy and the ultimate recovery period for the fundâ. http://www.ft.com/cms/s/0/9ca7d968-48d2-11df-8af4-00144feab49a.html THE RISK OF LOSS IN REAL ESTATE INVESTMENTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH INVESTMENT IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN REAL ESTATE INVESTMENTS CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED REAL ESTATE INVESTMENTS BY GOLDMAN SACHS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL INVESTMENT PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS.