Aon Selling Townsend Group to US PE Firm Riverside as Property Strategies Struggle

Financial services giant Aon has agreed to sell Cleveland-based real estate private equity firm Townsend Group to an investment manager based in the same city, as property strategies continue to struggle for traction.

Ohio’s Riverside Group, a private equity firm with $14 billion in assets under management, is acquiring Townsend Group as Aon plans to focus on consulting and risk management. Terms of the transaction were not disclosed, with Riverside, in a statement, pointing to the acquisition as an opportunity for expansion.

“We are excited to back the outstanding Townsend team and support the next phase of growth for the company,” Riverside managing partner Sean Ozbolt said in a statement. “Townsend is a market leader with a long and impressive performance history and a strong reputation in real asset advisory and investment management solutions.”

Aon had paid $475 million to acquire Townsend Group from Colony NorthStar in 2017 before that company changed its name to Colony Capital less than a year later. Colony Capital became DigitalBridge in 2021 when the fund manager shifted away from real estate strategies to focus on digital infrastructure investment.

Global Consortium

“This new partnership ensures continuity and exciting growth opportunities for our clients and further development opportunities for our colleagues,” Townsend president Anthony Frammartino said of the deal, with the executive set to become chairman and CEO of Townsend upon closing of the transaction.

With 110 team members across offices in London, Hong Kong and San Francisco, in addition to its home city, Townsend Group advises pension funds, insurers, sovereign wealth funds, endowments and foundations on property investments. The firm currently advises clients with real assets in excess of $218 billion, according to a statement

MLC Private Equity, the wealth management division of National Australia Bank, and Cleveland’s Ten Capital Management are co-investing in Townsend Group alongside Riverside, with Ten Capital having advised its partner on the transaction.

Riverside, a 30-year-old company which says it focuses on SEMM (the smaller end of the middle market), has grown from $1 billion in assets under management in 2004 to $14 billion managed by 16 offices in the US, Europe and Asia Pacific last year, according to its website. The company’s sole Asia location is in Singapore, with the address matching a Justco serviced office location in Asia Square Tower 2.

New York-based real estate investment house Bluerock, also backed the acquisition, with the company forming a partnership with Townsend to extend the Cleveland firm’s institutional investment capabilities to high-net-worth investors as part of the deal.

“Townsend’s leadership in the institutional real assets space is a natural fit with Bluerock’s pioneering role in delivering institutional-quality alternative investments to individual investors over the last 22 years,” Bluerock chief executive Ramin Kamfar said. “We look forward to partnering with Townsend to develop innovative new investment solutions to serve the growing needs of retail investors.”

Since Aon’s acquisition of Townsend Group in 2017, the property investment house raised $767 million for a global value-add strategy which reached a final closing in November 2018 and took in $1.5 billion in commitments for a follow-up strategy which wrapped up fundraising in March 2020.

Following the close of the transaction, Townsend will continue to work as a sub-advisor to Aon under a service agreement between the two companies.

Property Strategies Struggle

Aon’s sale of Townsend Group takes place during a tough stretch for real estate investment managers, with capital raising for property strategies globally slipping 51 percent in 2023, compared to a year earlier, according to research by ANREV.

The $129 billion raised for property strategies by investment managers last year represented the lowest level since 2016, the real estate investment industry non-profit said in the results of a survey published last month.

ANREV researchers attributed the dry spell to higher interest rates and growing economic uncertainty. Of the new cash raised last year, only 16 percent was deployed, the survey showed, which was down from 47 percent in 2021 and marked a record low rate of execution.