TerraCap Management has held a final closing for its first real estate fund, TerraCap Partners. The Cape Coral, Florida firm, which was targeting $25 million in equity commitments for its fund, wound up raising $877,000 over its target from a mix of accredited investors and high-net-worth individuals located in the U.S. and Europe. “We are very pleased to have been oversubscribed in this difficult economic environment,” said Stephen Hagenbuckle, president of TerraCap.
The TerraCap Partners fund is focused on residential and mixed-use development sites in southwest Florida, primarily those acquired from banks via discounted note acquisitions. The fund, which currently is 80% invested, will use its remaining proceeds to target additional investments throughout the southwest Florida and Naples region.
“We have used a portion of the proceeds to acquire both fee property and notes secured by real property at prices that reflect the current levels of distress in the marketplace,” Hagenbuckle said. “As a deep value private equity real estate fund, TerraCap will use its remaining capital to take advantage of the continued correction in real property values.” The fund is targeting gross IRRs of 22 percent to 27 percent.
Although TerraCap has acquired primarily residential and mixed-use properties to date, it anticipates a wave of defaults on commercial real estate loans as a result of the inability of borrowers to refinance at maturity and at the expiration of current forbearance agreements. “Distress in commercial real estate properties historically follows distress in residential markets, and TerraCap is well positioned to capitalize on opportunities given our recent funding,” Hagenbuckle said.
TerraCap Management was formed in 2008 by Hagenbuckle and Michael Davis to take advantage of the deep distress in Florida’s real estate markets.