Terra Capital Partners recently originated its first land loan since the start of the downturn, providing a $5.5 million mezzanine loan on a four-acre parcel of land in Atlanta. "We thought the price point made sense and we feel comfortable. We wouldn't have done it a year ago, but we adjusted our strategy like any smart manager does. We are always trying to look at what tomorrow will be," said Bruce Batkin, ceo.

The move is in line with Terra Capital's general philosophy of taking a measured approach to change, generally opting for smaller, more frequent tweaks to its strategy of originating short-term and mezzanine debt. The biggest departure from this approach was the company's sale of its entire portfolio in 2007. “We have changed our strategy little by little. Our most radical move was in 2007,” Batkin said.

Terra Capital made the decision to sell its portfolio, which was comprised of about 140 positions of mostly mezzanine loans and equity interests, because it believed that the market was extremely overheated. “We sold it all for cash and then sat on the cash for two years,” Batkin said. “And then we started making loans again in 2009. You'd think that when the market collapsed and banks became saddled with bad loans, a manager with cash would have been like a kid in a candy store.”

This wave of defaults, however, was not like 1993 when it was possible to buy enormous amounts of deeply discounted loans from banks and the RTC. “This time, in an effort to prevent further erosion of bank capital, the regulators discouraged banks from selling discounted loans. As a result, banks extended maturities, and there still hasn't been the wholesale disgorgement of loans we saw in the 1990s. This has been a very different, more measured, far more protracted recovery, and it is still continuing,” Batkin said.

Batkin said he isn’t seeing the same kind of overheating at this point in the cycle, particularly when looking at key metrics. Still, some of the underwriting that he is seeing has meant raised eyebrows. “Whether or not the market is too buoyant, I am seeing some signs of sloppiness,” he said.

The New York-based investment management company provides bridge and gap financing and works nationally in primary and secondary markets. It can provide small loans to major loans, originating everything from short-term bridge to long-term mezzanine debt, depending on the situation. The company will fund as much as 85% of the value of an underlying property and has financed nine asset classes, including properties in the four major food groups, hotels, medical office, student housing or self-storage.

The company is backed by private capital, with a network of high-net-worth investors, and invests via a private equity fund. “We are regularly approached by firms that want to distribute our product,” Batkin said.

Terra Capital’s Atlanta loan was originated on behalf of a New York-based developer for the first stages of Symphony Center, a planned $650 million development. Groundbreaking is expected to start next year; plans call for three towers of 38-60 stories with about 1,300 residential units as well as 92,000-square-feet of retail and a 340-room hotel. The development is located on 14th Street between Peachtree Street and West Peachtree Street.