Commercial Real Estate Profile: W. Stephen Hagenbuckle

Steve Hagenbuckle never intended to become a real estate investor. In college he majored in computer science, and spent years after graduating in the mid-1980s working with health care firms developing software and in sales.

But since Hagenbuckle launched TerraCap Management with an initial real estate fund focused on residential land in July 2008, the company has posted double-digit returns that would be the envy of any industry veteran.

“I could see, despite the serious economic recession we were experiencing at the time, the exponential growth that would occur in Florida,” says Hagenbuckle, TerraCap's managing partner. “About Florida's population growth I never had a reservation.”

Armed with $26 million raised from wealthy investors, Hagenbuckle began buying land — often at an 80% discount to the previous price. When residential building kicked up again four years ago, TerraCap was well positioned to generate profits.

“I believe good investors are contrarians,” says Hagenbuckle, 51. “You have to be an early mover.”

Hagenbuckle employed that same philosophy with a subsequent, $102 million fund launched to acquire commercial properties in 2011, and a third fund — one that will be $250 million when capped out — that has raised $40 million to date.

As with the initial investments, TerraCap's focus has been on buying assets at discounts and nursing value out of them to maximize returns.

Such was the case with a Hampton Inn & Suites hotel in Fort Myers Beach, which TerraCap bought for $5.1 million in November 2012. At the time, the hotel ranked in the bottom third in the chain for service and cleanliness. When it sold, for $9.42 million last fall, the property ranked in the top 10% of all Hampton Inns on both measurements.

“We're not just allocators of capital, we're operators,” Hagenbuckle says. “We look at everything so that we get the best returns for our investors.”

Hagenbuckle hopes to have similar success with its third venture, and the fund appears to be off to a good start.

At Keller Center, a 160,000-square-foot office complex in Maitland, TerraCap spent $57 per square foot last October. The building was completed for $180 per square foot.

In Sarasota, TerraCap in May acquired the four-building Gateway Professional Center for $37.1 million — a steep discount to the $55 million the office complex's seller paid in July 2006 — for its most recent fund.

In all, TerraCap has in excess of $150 million in assets under management comprising more than 4 million square feet.

The funds' investors say they are delighted with the results to date, and applaud TerraCap and Hagenbuckle's willingness to take calculated risks.

“Steve is very shrewd, and a smart guy who's been successful in various endeavors,” says Steve Newcom, a Chicago-based investor in TerraCap's funds. “As an investor with them, I couldn't be happier. The fact that they were diving into real estate when everyone else was bailing out said something to me.”

For his part, Hagenbuckle says he tries to maintain a certain philosophy toward the properties and TerraCap's success.

“I think you need to take your job seriously, but don't take yourself too seriously,” he says. “And I always try and remember: Life is not a dress rehearsal.”