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.