Columbia Threadneedle buys Lionstone in US RE foray

The Houston-based private equity real estate firm plans to keep its staff and investment strategy intact.

Columbia Threadneedle Investments is adding a US real estate arm with the purchase of Lionstone Partners, the firms said Wednesday.

Terms of the deal were not disclosed.

Boston-based Columbia Threadneedle, the $475 billion asset management platform of publicly-traded Ameriprise Financial, has $10.5 billion in UK property. Columbia Threadneedle is itself the product of multiple mergers: Ameriprise bought UK money manager Threadneedle Investments in 2003 and Boston-based investment manager Columbia Management in 2010, then rebranded the businesses together in 2015, according to various announcements.

“We felt it was a perfect alignment with their culture and our culture. We’re able to plug into their platform and research and overlay it with our own business.”

– Jane Page

Lionstone, the Houston-based private equity real estate firm, managed $6 billion in assets as of June 30, Wednesday’s statement said.

Columbia Threadneedle “made this acquisition to expand our investment capabilities into US real estate, which is an asset class [and geography] that is attracting significant global capital flows, especially into core,” a source familiar with the deal told PERE.

Lionstone, which was founded in 2001, began the sale process last year, looking for a strategic buyer to “supercharge” the firm’s existing data-driven strategy, chief executive Jane Page told PERE. In January, the firm hired investment bank Moelis & Company to line up options.

“Columbia Threadneedle is a $475 billion firm that is also based on research and analytics,” Page said. “They have a lot of fundamental research and quant strategies, and they’ve been doing this for longer than we have. We felt it was a perfect alignment with their culture and our culture. We’re able to plug into their platform and research and overlay it with our own business.”

Lionstone plans to continue its investment strategy and real estate offerings, keeping its staff and Houston headquarters, Page said. The firm, which also will retain the Lionstone name under Columbia Threadneedle, does not have any products currently in the market.

Lionstone held a final close on $450 million in February for its fourth value-added fund and a co-investment sidecar, PERE previously reported, and is seeking a 12-14 percent net internal rate of return on the vehicle. Its investor base included university endowments, foundations, family offices and large public and corporate pension plans, such as the Teacher Retirement System of Texas, which earmarked $100 million for the vehicle.

Page said limited partners for the firm’s commingled funds and separate accounts were “overwhelmingly positive” about the change. A spokeswoman for TRS declined to comment on Lionstone’s sale.

Under the new ownership, Page will report to Ted Truscott, Columbia Threadneedle’s CEO. The deal is expected to close later this year.

“Real estate is an important asset class for institutional and retail clients, and we are enthusiastic about the opportunity to further our capabilities in this growing asset class,” Truscott said in a statement.

PERE understands that Lionstone’s products will be marketed to Columbia Threadneedle’s institutional clients. Separately, the latter firm has a US real estate investment trust strategy for retail investors in a mutual fund. Columbia Threadneedle’s UK real estate vehicles include an open-ended property fund, the Threadneedle UK Property Authorised Investment Fund, that managed £1.3 billion ($1.8 billion; €1.5 billion) as of August 31, according to its website.

Page said the firm began looking for buyers partly because of increasing consolidation among private equity real estate firms. M&A deals in private equity real estate this year include Hong Kong-based alternative investment manager CITIC Capital acquiring a 48 percent interest in San Francisco-based Stockbridge Capital Group and Japanese real estate company NTT Urban Development purchasing a 15 percent stake in Morristown, New Jersey-based Normandy Realty Partners, PERE previously reported.

This year has also seen two cross-border deals involving larger asset managers with real estate platforms: Japanese telecommunications and internet corporation SoftBank Group’s purchase of New York-based Fortress Investment Group for $3.3 billion; and Japanese conglomerate Mitsui’s buy of a 20 percent stake in Los Angeles’s CIM Group.

Investment firm Neuberger Berman’s permanent capital vehicle Dyal Capital Group has also taken multiple minority interests in firms that have real estate platforms, including Atalaya Capital Management in June, HIG Capital in August 2016 and Starwood Capital Group in September 2016.