The Journal’s piece on conflicts of interest at Goldman Sachs’s commercial real estate funds is a good look at yet another hangover from bubble-era practices.

The paper says investors in Goldman’s Whitehall funds are ticked because Goldman is on both sides of negotiations on restructuring investments.

One of Goldman Sachs Group Inc.’s premier real-estate funds is in discussions with its lenders to restructure debt on some of its biggest investments: Nevada casinos, German office buildings and a U.S. hotel chain.

The wrinkle: One of the main lenders on those deals is Goldman Sachs.

That means Goldman can give with one hand and take with the other, which is crazy.

Problem is, this is about the least sympathetic carping by investors you’re ever going to hear. These folks knew this conflict was baked in to the funds when they invested, but they overlooked it because they wanted a piece of Goldman’s money-making machine. These aren’t mom and pop investors, they’re institutional guys. Too bad for you guys.

Still, they raise a good point for the next batch of investors tempted to overlook such egregious conflicts.

With commercial real-estate values plunging, investors and their advisers have begun focusing on the conflicts. They say that Goldman is able to use its position as investor, lender and fee-collector to benefit itself at the expense of outsiders.

Check out this number:

For Whitehall’s biggest fund, Whitehall Street Global Real Estate Limited Partnership 2007, the news has been almost all bad. In 2008, it wrote down $2.1 billion of the $3.7 billion invested between May 2007 and August 2008.

That’s a 57 percent plunge. But, as the Journal says: “All wasn’t lost for Goldman.”

During 2008, Goldman made at least $88 million in fees for arranging financing for Whitehall 2007 deals, plus an additional $30 million in advisory fees, and $19 million in property-management fees, according to documents for the first, second and fourth quarters of the year that were reviewed by The Wall Street Journal.

In addition, the Goldman fund charges a 0.5% management fee on the gross cost of the fund’s investments, which was $17.2 billion as of Dec. 31. Assets under management change quarterly, but assuming a static value of $17.2 billion for 2008, that would have earned Goldman an additional fee of $86 million.

That’s $223 million total, or about one-fifth of Goldman’s total investment in the $3.7 billion fund assuming its usual one-third ratio—and that’s just for last year. It will still rake in fees this year, too.

Which means that Goldman had less incentive to make good investments with its investors’ money, even though it was putting significant skin in the game upfront—something the WSJ should have made explicit. A typical life cycle for those kinds of funds is seven to ten years. By that point, Goldman will figure to have easily recouped its investment through fees alone.

But it has other protection, too, given its role as lender:

Those conflicts are on display in Nevada, where Goldman paid top dollar for three casinos and a 2,000-room hotel from financier Carl Icahn in February 2008.

To do the deal, Whitehall and a smaller partner borrowed about $1.1 billion from Goldman’s mortgage unit and guaranteed $200 million of that debt. Goldman earned $11 million for arranging the financing, according to fund documents, in addition to an unknown amount earned by the mortgage unit.

This spring, Whitehall warned its investors that lower-than-expected revenue at those properties, which include the Stratosphere hotel and casino on the Las Vegas Strip, may lead to a default on the loan. So Whitehall asked its lender, Goldman, to restructure the debt. Goldman agreed.

Under a recapitalization plan Whitehall was finalizing in April, the Goldman mortgage unit will forgive the Whitehall fund $593 million of the $1.1 billion in debt and also release it from the $200 million in recourse debt, according to fund documents. In exchange for the leniency, the Goldman mortgage unit would gain a 22% noncontrolling equity interest in the investment.

So Goldman takes a big hit on the loans, but gets a big equity stake in the investment at a big discount. The company says it formed an “independent” board with outside investors, but it should never be in this position in the first place (These kinds of conflicts are more prevalent than you might expect: Wall Street firms have done both sides of deals, and commercial real-estate firms sometimes represent buyer and seller or tenant and landlord).

Good for the Journal for pointing this out.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.