Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. CONSULTANTS
September 05, 2011 01:00 AM

Townsend deal a jackpot for execs

Holding company said to pay $100 million for its 70% stake in firm

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Terry Ahern & Kevin Lynch

    The two founders of Townsend Group, who sold off 70% of the business last week to money manager holding company Aligned Asset Managers LLC, each get a multimillion-dollar payday from the deal, industry insiders say.

    The co-founders — President and CEO Terry Ahern and Kevin Lynch, principal — along with other Townsend executives will hold a combined 30% of the real estate consultant and investment manager, with the co-founders expected to hold the largest interest in the firm, after Aligned, when the deal closes.

    Neither Mr. Ahern nor Mr. Lynch would comment on the financial terms of the deal or how much money each will earn.

    Townsend rocked the real estate investment community on Aug. 29 when it announced the sale of the majority stake to Aligned, a Stamford, Conn.-based holding company formed in January with capital from private equity firm GTCR LLC, Chicago.

    The Townsend deal is Aligned's first.

    Terms of the deal weren't disclosed, but industry insiders are estimating Aligned is paying more than $100 million for its 70% stake.

    A GTCR executive said Messrs. Ahern and Lynch, along with the six other shareholders in Townsend, signed employment contracts of three to five years.

    “The founders and others are selling out some of their ownership,” said Collin Roche, GTCR principal. “They are not retiring and they are retaining a significant ownership. The (eight-member) shareholder group generally is getting money to diversify their wealth.”

    The capital is also being used to expand ownership to 13 from eight executives and to continue Townsend's global expansion. Townsend had $105 billion under advisement as of June 30 and $10.1 billion under management.

    Industry insiders expect that Messrs. Ahern and Lynch will get about 40% of the remaining portion of the company and the future profits, less capital added to Townsend's balance sheet.

    Whatever they end up gaining from the deal, it's not bad for two men who started Townsend in 1983 while still in their 20s, financing the Cleveland-based real estate consulting firm with their credit cards.

    Mr. Ahern, an attorney, had a law practice that included real estate before switching to real estate investments. Mr. Lynch began his career underwriting real estate loans for a regional savings and loan. Before starting Townsend Group, both worked at New York-based real estate investment bank Stonehenge Capital Corp.

    The pair started off providing real estate consulting services to investment brokerage firms, Big Eight accounting firms, insurance companies and Fortune 500 companies. Townsend's first institutional client was the now $12.3 billion Ohio Police & Fire Pension Fund, Columbus, Mr. Ahern said.

    “We were real estate people that went into consulting vs. consultants that were trying to understand real estate. We continue to differentiate ourselves because we think like investment people, not like consultants,” Mr. Lynch wrote in an e-mailed response to questions.

    David Minella, Aligned's CEO, said the purchase of a majority stake in Townsend is the largest investment made by a money manager holding company.

    Capital left over

    GTCR's Mr. Roche said a “meaningful portion” of GTCR's initial $200 million investment in Aligned Asset Managers was used to buy into Townsend Group, with enough capital left over to make a few more investments.

    Townsend Group employees will own 30% of the company and share in 10% of future profits, Mr. Ahern said in a separate telephone interview.

    The group of 13 Townsend executives will have a 37% stake in the firm going forward, he said. For starters, they will receive 10% of future cash flows. Of the remaining 90% of cash flows, 30% will go to the executive group, Mr. Ahern explained.

    “We are very pleased that through a 10% profit interest and through a 30% direct equity ownership, the employees of Townsend will effectively own 37% of the future of the firm,” a letter to Townsend clients from Mr. Ahern said. “We believe this amount of ownership compares very favorably with other recent transactions in the real estate sector.”

    In the client letter, Mr. Ahern said Townsend executives view the partnership with Aligned “as a critical next step in creating a global real estate platform capable of not only keeping pace in an ever-changing real asset investment market, but possessing the independent culture and thought leadership necessary to continue our mission.”

    Real estate industry executives who spoke on condition of anonymity said the transaction underscores that Townsend Group is more of a money manager than a consulting firm. Townsend provides investment management services including funds of funds, co-investment funds and separate accounts.

    However, both Townsend's Mr. Ahern and Aligned's Mr. Minella denied that is the reason for the deal. Both said that Townsend Group will continue to be committed to its consulting business.

    “We looked at Townsend in a holistic way,” Mr. Minella said in a telephone interview. Aligned executives saw that Townsend was profitable both as a consultant and as a money manager. “We valued it as a combined business,” he added.

    “We believe the consulting practice is a strategic part of our business ... We intend to continue to develop both practices,” Mr. Minella said.

    Townsend executives provide advice to large capital sources and through that, the firm maintains significant goodwill, superior access to deal flow and “a unique window into the marketplace,” Mr. Ahern said. “Our discretionary (business) adds to the revenue of consultants and attracts the type of intellectual capital which benefits our consulting clients.”

    Strategic part of business

    In an e-mailed response to questions about the consulting business, Mr. Ahern said, “Consulting is a strategic part of our business. It will be business as usual. Nine of 13 equity participants have one or more consulting clients,” he stated.

    Mr. Ahern noted that two of Townsend's most recent clients hired Townsend for consulting. He didn't name them, but Pensions & Investments reported that Townsend was hired in August by the $50.3 billion Massachusetts Pension Reserves Investment Management Board, Boston, and by the $15 billion New Mexico State Investment Council, Santa Fe.

    “In both instances, we replaced another consulting firm. It speaks to consulting being a strategic part of our business, and I would suggest to the benefit of our model,” Mr. Ahern stated.

    So far, client reaction has ranged from wait-and-see to undisturbed.

    “The sale at Townsend is a change in their capital and ownership structures,” said Ricardo Duran, spokesman for the $154.2 billion California State Teachers' Retirement System, West Sacramento. “We don't anticipate that to have any effects on our account or on their service to our account.”

    Townsend is in the fourth year of a five-year real estate consulting contract with CalSTRS, he added.

    Related Articles
    Kevin Lynch, Townsend Group co-founder, dies
    Recommended for You
    Australia's Frontier Advisors names head of new Tokyo office
    Steven Foresti
    Wilshire's asset allocation CIO shifts to adviser role, head of indexes departs
    Alison Lonstein, Matt Maleri, Joe Nankof and Emma O’Brien
    NEPC lifts out a GSAM team for corporate consulting practice

    Reader Poll

    August 10, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Gaining Momentum: Where Next for Trend-Following?
    How Has 2022's Carnage Reshaped Global Stock and Bond Markets?
    Can Sustainable Labeling of Financial Products Prevent Greenwashing?
    Hedge Funds 2.0: Back to the future
    Is there a mid-cap gap in your DC plan?
    Why pursue direct lending in the core middle market?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    August 1, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit