Ameriprise Financial plans to close down its U.S. real estate subsidiary, Houston-based Lionstone Investments, offloading about $5.5 billion in commercial real estate in major cities across the country to focus on investing in the United Kingdom and across Europe.
The Minneapolis-based financial services firm said it decided to wind down those operations after conducting a "strategic evaluation" of the business. Ameriprise added in a statement that it's "fully supporting" Lionstone's clients as it shifts their assets to new investment managers. More details weren't disclosed and Lionstone declined to comment.
The assets will be transitioned "in an orderly way" over the next several months, Ameriprise said.
The decision by Ameriprise comes as pricing in U.S. real estate has suffered with elevated interest rates and uncertainty in the past two years. Those market fundamentals appear to be changing, with U.S. commercial real estate prices improving in the third quarter in a move showing that some investment-grade property deals are starting to pick up, CoStar News recently reported.
The velocity of deal flow is accelerated as properties in some U.S. markets have been hit by big price drops and other markets struggle to regain the real estate investment momentum they once had, according to CoStar News. It is unclear if any of these factors played a direct role in the company's decision to distance itself from U.S. commercial real estate.
As of Sept. 30, Lionstone had about $5.5 billion of institutional assets made up of office, mixed-use, retail and apartment properties. Lionstone's headquarters is in downtown Houston and the company lists other offices in Boston and Los Angeles, reflecting the geographic diversity of the assets as well as the varied property type.
Hunting for yield
Walter Bialas, a senior vice president of insight for Avison Young, said commercial real estate executives are on the hunt for yield and pushing office developers into self-storage and other property types.
"Commercial real estate is a tough business these days," Bialas told CoStar News. "It's not as easy as it once was." Bialas isn't directly involved with Lionstone's business.
The sale of the properties across the country isn't the only deal activity involving a variety of property types related to firm of late.
An affiliate of Lionstone sold the two-building historic complex housing its headquarters in May to The Wideman Co. One of the buildings was previously occupied by a WeWork location that the coworking company closed in early 2023. Spaces, a coworking brand under the IWG umbrella, leased WeWork's former space at 708 Main St. comprising 95,000 square feet in the third quarter and the building recently opened for business.
In June, Lionstone bought The James Park Place, a 344-unit luxury multifamily development in Houston's River Oaks area, assuming a $46 million loan as part of the deal with a joint venture, according to CoStar data. In another joint venture, Lionstone purchased The Morris, a 19-story, 344-unit property in the heart of Nashville’s historic Music Row, in August.
Ameriprise expects the transition of Lionstone's U.S. real estate investments to have no material impact on its business. Ameriprise said it plans to focus on profitably expanding its alternatives business, with opportunities in the United Kingdom and European real estate, as well as hedge funds and private equity.
Lionstone changes
Lionstone has been part of Ameriprise since the parent company's subsidiary, Boston-based Columbia Threadneedle Investments, acquired the real estate investment firm in 2017 to expand its commercial real estate holdings. Columbia Threadneedle Investments declined an interview request from CoStar News.
The winding down of Lionstone's operations comes as several of the investment firm's longtime real estate executives have left the company. Lionstone was co-founded in 2001 by Tom Bacon, Glenn Lowenstein and Dan Dubrowski.
Dubrowski left Lionstone last month, following the other two co-founders in exiting the firm and leaving its value in the industry diminished, real estate sources tell CoStar News.
Since Lionstone was founded, the company has invested in more than 22 million square feet in 17 major U.S. markets. The company's current holdings are in Atlanta; Austin, Texas; the Bay Area; Dallas; Denver; Houston; the greater Los Angeles area; Nashville; Pittsburgh; Raleigh, North Carolina; and Washington, D.C., according to its website.
Steve Triolet, senior vice president of research and market forecasting for Houston-based Partners, said the timing of Lionstone's transfer of assets to other asset managers was "weird" with the Federal Reserve having cut interest rates for the second time in recent months. Triolet is not directly involved with Lionstone's business.
"Without knowing anything else about the financials, it seems like weird timing," Triolet told CoStar News. "The office market is seeing green shoots across multiple markets. I wouldn't call it bottom, but there are signs that things are turning the corner a little bit. I'm perplexed."