Colony NorthStar has agreed to sell the Townsend Group, the Cleveland, Ohio-based real assets consultant and multi-manager, to global insurance broker Aon for $475 million, subject to certain purchase price adjustments.
Net proceeds to Colony NorthStar for its ownership stake after transaction and other expenses is estimated to be approximately $379 million. Morgan Stanley acted as exclusive financial advisor for the transaction.
“The divestiture of Townsend is definitely bittersweet for Colony NorthStar,” commented Richard Saltzman, president and chief executive of Colony NorthStar. “But we’re extremely pleased that the talented Townsend team has found a great new home with Aon.”
In April, sister publication PERE reported that Colony NorthStar was exploring strategic alternatives for Townsend, including a potential sale. In conjunction with the sale, Townsend also was said to be seeking to recapitalise its business with new capital sources.
Townsend provides global investment management and advisory services, primarily focused on real estate, with assets under advisory totaling approximately $175.7 billion and assets under management totaling approximately $14.5 billion as of 31 December, 2016.
It was understood that Colony NorthStar wanted to sell Townsend because majority ownership of an asset manager does not fit with Colony NorthStar's business model as a real estate investment trust, which owns only real estate assets.
“Townsend is a terrific non-core legacy NorthStar business, but by the closing of the Colony Capital/NorthStar merger in January of this year, it became clear that the market perceived a conflict with Colony’s institutional investment management business,” said Saltzman. “For these reasons, Colony NorthStar’s sale of Townsend to Aon is a winning outcome for all three organizations.”
In October 2015, NorthStar Asset Management, one of the predecessor entities to Colony NorthStar, agreed to acquire an 85 percent interest in Townsend for $380 million. Subsequently, NorthStar Asset Management entered into a three-way merger with Colony Capital and NorthStar Realty Finance. The merger closed in January, creating a real estate and investment management powerhouse with $56 billion of assets under management.
Terry Ahern, chief executive officer of Townsend, will continue to lead real estate and real asset investment services of Townsend as part of Aon’s Global Retirement & Investment organisation.
The deal is expected to close over the next six months and is subject to certain customary and negotiated closing conditions.