Townsend founder's final sell-down

With the latest sale of the Cleveland, Ohio-based investment management and advisory firm, founder Terry Ahern will fully cash out of the company he created more than 30 years ago.

After 34 years, Terry Ahern is getting ready to fully relinquish ownership of his Cleveland, Ohio-based real assets investment management and advisory firm, The Townsend Group.

Last month, London-based professional services firm Aon agreed to acquire a 100 percent interest in Townsend for $475 million. The deal is expected to close over the next six months.

Colony Northstar currently owns an 85 percent stake in the company, while the remainder is held by Townsend employees. Ahern is the only Townsend professional who holds a stake of 5 percent or more in the firm, according to documents from the Santa Barbara County Employees Retirement System.

The transaction marks the second time Townsend has traded in as many years – and the third time that Ahern and the firm’s other employees would be selling interests in the firm.

Townsend, which was founded by Ahern and Kevin Lynch in 1983, first sold a reported 70 percent stake to Chicago-based private equity firm GTCR in August 2011. Prior to the sale, the firm’s largest owners were Ahern, with a stake of between 50 percent and 75 percent; and Lynch, with a stake of between 25 percent and 50 percent, according to an October 2010 filing with the Securities and Exchange Commission.

In October 2015, NorthStar Asset Management, one of the predecessor entities of Colony NorthStar, agreed to acquire an approximately 85 percent interest in Townsend. The latter firm’s employees, meanwhile, sold an additional 15 percent stake to its new majority owner.

Townsend is considered one of the biggest and most influential names in the real estate advisory space, with $175.7 billion in assets under advisement and $14.5 billion in assets under management as of December 31. The firm would become part of Aon’s already sizable investment business, which currently advises on $4.2 trillion of assets – of which more than $33 billion is in real estate – and manages more than $100 billion of assets globally.

While Ahern would no longer have a financial interest in Townsend after the latest sale closes, he is expected to remain actively involved in the business as head of real estate and real assets investment services for Aon. The latter company already has a dedicated real estate team of 11 professionals led by partners and co-heads of global real estate Catherine Polleys and Nick Duff, according to a February presentation to the Employees Retirement System of Texas.

As for Townsend, it has 101 staff across its four offices in Cleveland, San Francisco, London and Hong Kong, with 70 in investment or executive management positions, according to the SBCERS documents.

It was unclear how staffing and responsibilities would change once the two teams combine. “In terms of the team structure, right now, we are focused on closing the deal and then will focus on integrating the two teams,” an Aon spokeswoman wrote in an email to PERE.

In acquiring Townsend, Aon also would inherit the firm’s perceived conflicts in having both an investment and an advisory business, as well as a lawsuit that former client Dallas Police and Fire Pension System filed against Townsend late last month.

Some investors were still processing the news of the deal and its implications at press time. “We are still learning how this will unfold,” one Aon real estate client told PERE. “In the meantime, we continue to work with Aon on sourcing and committing to real estate funds.”