The 25-year-old winger left St James' Park to join Crystal Palace in a £13million in July having spent just five months with the Magpies but that was a scenario Benitez was keen to avoid.
"With Andros, I wanted to keep him because he was exactly the type of creative player that we could build the team around, but football is not always as easy as that," the Spaniard told the club's official website.
"He loved being at Newcastle but he wanted to play in the Premier League. We had to respect his decision."
Townsend had only joined the Magpies from Tottenham Hotspur in January but moved on following the Toon's relegation to the Championship.