Terra Capital launches new fund

A new entity formed by Terra Capital Partners in conjunction with the president of Academy Properties is looking to raise $200m for a fund focused on gap financing.

Terra Academy Partners – a new manager formed by the principals of Terra Capital Partners and Chance Mims, the founder and president of Academy Properties – has launched a fund that focuses on providing gap financing to income-producing properties in California. The fund, called the Terra Academy California Realty Income Fund, is targeting total capital commitments of $200 million.

Launched in late May, the fund is open to income-oriented investors that have regular distribution obligations, such as pension funds, and is seeking unleveraged returns of 9 percent to 12 percent. The minimum commitment is $10 million.

According to an investment summary, the fund will focus exclusively on providing small- to mid-size mezzanine loans, preferred equity and bridge loans to owners of income-producing properties when such owners are unable to obtain sufficient capital through conventional first mortgage financing. It will target office buildings, shopping centers, apartment complexes, industrial warehouses and, to a lesser extent, hospitality properties throughout California.

According to Bruce Batkin, co-founder and chief executive of Terra Capital, the fund is an extension of what the New York-based commercial real estate finance and investment firm has been focused on nationally since its formation in 2002, but “with a tighter focus on California.” He explained that the firm wanted to focus on one state seeing economic recovery rather than engage in a diluted effort nationwide for a relatively small fund.

“We saw [California] as a big opportunity because of the size and diversity of economy,” Batkin said. “It's a laser-like effort by geography and investment philosophy.” Although the fund will focus mainly on California properties, it reserves the right to seek properties outside of the state.

Terra Capital managing director Thomas Miller said the firm, which is raising the fund without the help of a placement agent, expects to have its first close later this year, “with a final close no later than next May.”