Goldman Strikes Deal To Buy LCN To Become Hands-Off Landlord
Goldman Sachs Group Inc. struck its second deal in a week as the firm pushes ahead with plans to grow its $4 trillion money-management arm.
The Wall Street giant will pay as much as $410 million to buy LCN Capital Partners, a commercial real estate investor that focuses on sale-leaseback agreements and triple-net leases, Marc Nachmann, the head of Goldman’s wealth- and asset-management division, said in an interview.
Goldman’s latest deal targets a booming corner of the real estate market that has attracted asset managers looking for what’s essentially a synthesis of real estate and corporate credit. As a net-lease investor, the firm gets to own a property, while the tenant pays rental income and other expenses such as taxes, insurance and maintenance.
Money managers have been attracted to the industry because of the tax benefits of real estate investments and the predictable flow of income from large corporate tenants, who carry high credit ratings. The stream of cash functions as a predictable coupon, often with rent automatically increasing with inflation.
The deal will allow Goldman to offer leases to its corporate clients — across all sorts of sectors — who like the fact they don’t need to hold property on their balance sheets. Goldman funds will also be able to sell the investment to its broader distribution channel and base of high-net-worth investors, who are conscious of hits from tax and inflation.
“There’s going to be a growing desire” for these products, Nachmann said, adding that LCN, which has a footprint in the US and Europe, is “at a scale we can materially grow from here.”
Under Chief Executive Officer David Solomon, Goldman has increasingly focused on bulking up its asset-management business at a time when its dominant investment bank has been printing lucrative earnings that have given a big boost to the stock price. This acquisition is the fourth deal announced by the bank in less than 12 months, and executives have indicated they intend to scour for more opportunities.
The new deals are a test for Goldman after a flurry of underwhelming deals in Solomon’s early tenure atop the Wall Street firm. The bank ended up unwinding two of those three acquisitions, and a third — a Dutch asset manager — faced reports of integration challenges. Still, Goldman’s stock has almost quintupled during his tenure.
Since its 2011 inception, LCN has raised 10 investment funds that aim to outperform credit and real estate rivals. Its founders, Edward LaPuma and Bryan Colwell, will join Goldman once the transaction is completed. The LCN team will become part of the asset manager’s private real estate investing platform, under Jim Garman.
Earlier this month, Goldman agreed to buy ETF issuer Neos Investments in a $2.25 billion transaction. That purchase followed a $2 billion deal in December to buy Innovator Capital Management, another ETF platform.
This article was provided by Bloomberg News.
