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July 12, 2017  

Aon Set to Add Townsend to Advisory Practice

Aon is in advanced talks to buy real estate investment advisor Townsend Group, a move that would expand the scope of Aon’s alternative-investment advisory business.

Townsend’s parent, Colony NorthStar, received bids from a dozen potential suitors, but is now close to finalizing a deal with Aon, a source said. Morgan Stanley is advising Colony.

Aon, headquartered in London, presumably would fold Townsend in to its investment-consulting business, Aon Hewitt Investment, which advises institutional clients on alternative investments including hedge funds. Townsend would significantly enhance Aon Hewitt’s capabilities in the real estate field.

The deal would mark the latest step in Aon’s evolution from insurance broker to global consulting firm advising companies and institutions on a range of issues including employee benefits and investment management. Aon’s emergence as an alternative-investment advisor stems from its 2010 acquisition of benefits consultant Hewitt, which at the time was absorbing Ennis Knupp & Associates, a Chicago investment-advisory giant.

Aon Hewitt Investment, based in Lincolnshire, Ill., advises clients on $4.1 trillion of non-discretionary assets globally, while also managing about $100 billion on a discretionary basis.

Townsend manages $14.5 billion of real estate equity and debt investments, mostly through multi-manager vehicles. Its non-discretionary advisory business encompasses $176 billion of real estate assets held by pensions, endowments and foundations. Townsend is believed to have the largest institutional-investment practice among real estate consultants.

The Cleveland firm also is looking to dip its toe in the retail market via a new investment operation called Townsend Group Advisors that plans to launch an SEC-registered fund.

Townsend has experienced ownership turnover in the past few years. In 2011, the firm sold a majority stake to Aligned Asset Managers, a now-defunct operation that invested in the general partnerships of alternative-investment firms with backing from private equity shop GTCR. Aligned and GTCR exited the position in 2015, when NorthStar Asset Management bought an 85% stake in Townsend for $380 million.

But after NorthStar merged this year with Colony Capital to form Colony NorthStar, the publicly traded entity quickly moved to sell Townsend. The remaining 15% interest in Townsend is held by its management group, and it’s unclear whether that stake would be included in a trade.

Townsend is led by chief executive Terry Ahern. He co-founded the firm in 1983 with Kevin Lynch, who died in February.