The real estate arm of New York-based private markets firm StepStone Group is buying 100 percent of the equity in Cleveland, Ohio-based Courtland from its current owners, which include the estate of managing principal and co-founder Michael Humphrey, who died suddenly in November 2016, managing principal Steven Novick, managing director Michael Murphy, managing director of Europe Gianluca Romano and senior vice president Andrew Mitro, and Courtland EPPV 2016, an employee profits interest plan. The transaction, the terms of which are not disclosed, is expected to close by the end of March.
The combined group would be called StepStone Real Estate, but for up to two years, SRE would conduct business with Courtland’s existing clients under the name “Courtland, a StepStone Company.” In addition to its real estate clients, Courtland team members also would continue working with its infrastructure and agriculture clients, but any new real assets business would be handled by StepStone’s infrastructure and real assets group going forward.
Once the acquisition is completed, SRE, which currently comprises 24 dedicated staff, would see its team more than double with the addition of 26 professionals from Courtland. The entire Courtland team, including its legal, finance and administration departments, is expected to join SRE.
Courtland staff would retain their current responsibilities, although titles may change to be consistent with those of StepStone Real Estate, with senior vice presidents assuming the titles of principal or managing director. Most of the Courtland team will continue to operate out of its office in Cleveland, while its staff in Los Angeles and London will merge with StepStone’s offices in California and London. Meanwhile, Novick and Romano would also become partners of SRE and Novick will join SRE’s executive committee. Novick would continue to oversee Courtland’s current client relationships.
“Courtland professionals will be focused on continuing to serve their clients,” said Jeff Giller, partner and head of SRE, in an interview with PERE. “But they also are to be heavily involved in the growth and development of the SRE platform.”
Courtland would help to bolster SRE’s fund manager research capabilities, but additionally assist in evaluating co-investment and secondaries opportunities, he added.
Humphrey had explored strategic alternatives for Courtland for a number of years, including possible sales to Pavilion Financial and Capital Dynamics, according to multiple sources familiar with the matter. That strategic review continued after his death, leading SRE to initiate discussions with Courtland on a potential acquisition about a year ago.
At the time, SRE had been seeking to expand its primary, or fund investments, business in particular.
“While we had some level of success growing organically, we understood it would take longer than if we made a strategic acquisition,” said Giller.
Speaking on Courtland, he added: “We weren’t looking at anybody else, we were only going to look a team of high-quality people. If it weren’t for the strength of their brand, their team, and the overall strength of their business practices, we wouldn’t have wanted to talk to them.”
In June, PERE reported that Courtland was considering a possible sale, and had attracted a significant amount of interest from potential buyers, including Bala Cynwyd, Pennsylvania-based alternative investment manager Hamilton Lane. By November, SRE had emerged as a lead contender to buy Courtland, PERE reported at the time. Courtland currently has $92 billion in assets under advisement on behalf of predominantly US institutions, including public pension plans, Taft-Hartley plans and corporate and private pensions or endowments.
StepStone Group – which also has private equity, private debt and infrastructure and real assets business lines – expanded into real estate in 2014 with the acquisition of Clairvue Capital Partners, a San Francisco-based real estate investment firm. The business – spanning offices in San Francisco, New York, London and Beijing – currently has $7 billion in assets under advisement and $2 billion in assets under management. The majority of SRE’s clients are non-US institutions in the Middle East, Asia and Europe.