Townsend closes $496m RE fund of funds

The Townsend Group held a final close for its latest real estate fund of funds that invests in direct co-investments and secondaries, the firm said Tuesday.

The Cleveland, Ohio-based investment firm raked in $496 million for Townsend Real Estate Alpha Fund II from more than 20 institutional investors, including public and private sector pension funds, foundations and endowments, according to a statement. The firm had a $5 million minimum investment with a 1 percent annual fee, according to minutes from the Macomb County Employees Retirement Commission in Michigan.

Townsend has already deployed more than $300 million of the capital from the fund and plans to start marketing the third fund in the series later this year, according to the statement.

“The volatility in the markets is providing us with compelling investment opportunities,” Terry Ahern, Townsend’s chief executive said in the statement. “We are finding investments with attractive returns, good equity multiples and the ability to structure strong downside protection.”

The firm held a first close on $132.5 million for the fund in December 2014, according to a filing with the US Securities and Exchange Commission. Since then, Townsend has held at least four other closings on the fund. Investors include Pennsylvania State University, which allocated $15 million to the fund, according to the endowment’s materials. A target for the fund has not been publicly disclosed.

Foreside Fund Services was the placement agent for the fund.

Townsend raised $357.8 million, with a $600 million target, for the first fund in the series. Investors in the 2013 vehicle included the Sheet Metal Workers National Pension Fund and the Baptist Foundation of Texas, according to PERE Research and Analytics. Townsend invested in Fortress Investment Group’s Fortress Japan Opportunity Domestic Fund II, among other vehicles, with capital from the fund, according to a tax filing from the Baptist Foundation of Texas.

Fundraising for Townsend Real Estate Alpha Fund II came during an ownership change: NorthStar Asset Management bought an 85 percent interest in Townsend in October for approximately $380 million, primarily from Chicago-based private equity firm GTCR. Townsend previously had sold a 70 percent stake in the firm to Aligned Asset Managers, a portfolio company of GTCR, in August 2011. New York-based NorthStar also purchased an additional 15 percent stake from Townsend.

Townsend, which was founded in 1983, managed approximately $13.8 billion of assets as of September 30. The firm has deployed $3.8 billion in 86 co-investment and secondaries deals since 2007, according to the statement.