TerraCap Management has held a first close on $10 million of equity for its second real estate fund, TerraCap Partners II. The fund, which is targeting total commitments of $200 million, is scheduled to hold a final close in May 2013.
Washington, DC-based real estate investor and advisor Militello Capital is one limited partner that has committed to the fund; others will include high-net-worth individuals, large family offices, endowments and other institutional investors. TerraCap also will make its own commitment of $3.5 million to the fund.
“Distress in commercial real estate properties historically follows distress in residential markets, and TerraCap II is well positioned to capitalise on opportunities given our recent funding,” said W. Stephen Hagenbuckle, co-managing principal of the firm. The fund, which is targeting a net internal rate of return of 20 percent, will focus on off-market acquisitions of properties in various stages of default that are located in the southeastern US, particularly Florida.
About 80 percent of the fund’s investments will involve acquisitions of office and retail properties ranging from 50,000 to 150,000 square feet in size and from $2 million to $20 million in price, with the remainder in industrial, hospitality and land assets. TerraCap has identified a pipeline of six deals scheduled to close within the next three to six months and will invest alongside joint venture partners that will provide 50 percent to 80 percent of the equity needed for the acquisitions. The first transaction, which involves the purchase of a 170-acre land site in southwestern Florida that had been designated for mixed-use development, is slated to be completed early next month.
TerraCap’s previous fund, TerraCap Fund I, closed in December 2010 on nearly $26 million in equity commitments. That fund is fully invested, having executed 15 land acquisitions in high-growth markets in southwestern Florida.