The private equity real estate fund group of Goldman Sachs has made its first European debt investment since the beginning of the slump, marking the start of a new push into the distressed property market.

Goldman Sachs’ Whitehall fund group, one of the largest investors in property debt over the past two decades, has acquired almost 900 non-performing and sub-performing loans backed by Italian residential property, which had an original value of about €120m ($174m).

Goldman Sachs declined to give the price, but it is thought that they have been bought at less than half face value given the decline in property.

All loans were made between 2006 and 2007 by an Italian financial services company in administration.

The deal marks a return to the European real estate debt market for Goldman Sachs, which has a history in investing in the underlying loans behind property alongside physical assets, notably buying New York’s Rockefeller Center in 1996.

Like many private equity rivals, real estate has caused significant losses for Goldman as the value of assets held in previously committed funds has fallen. It is now returning to the market to take advantage of distressed owners of otherwise sound property.

Goldman’s Real Estate Principal Investment Area (REPIA), which manages the US bank’s Whitehall series of funds, has lined up more than $6bn of capital for investing in real estate globally.

It said that this deal underlines what is expected to be a renewed focus on distressed debt.

Goldman Sachs believes there should be new attractive opportunities for real estate investing given the extent of the global financial downturn in property prices, as well as the increase in problems among property owners who are struggling to correct defaults on loans.

The US bank has restructured its management teams to support the investment push.

Ed Siskind, the co-head of REPIA, is to take complete charge of global real estate investment and chair the investment committee. His former co-head, Todd Williams, is retiring at the end of the year, while Richard Powers will move from London to New York to lead US real estate investment with Alan Kava.

Goldman joins a number of banks looking to invest new private equity real estate funds. Blackstone said this summer that it was set to return to the commercial property market in Europe for the first time since 2004 after closing a €3.1bn European real estate fund, adding to a global fund of almost $11bn. There are also real estate funds waiting to be committed by Westbrook, Carlyle and Area, the fund manager formerly known as Apollo Real Estate.