Diamond Realty Plans $500M+ Capital Investment

LOS ANGELES—Diamond Realty Investments, a fully owned subsidiary of the Mitsubishi Corp., is making a splash in the real estate market with plans to invest $500 million in equity over the next 12 months. The company specifically plans to focus on the institutional-grade opportunities in the industrial sector, including a 9-million-square-foot logistics center development in Dallas. Diamond Realty Investments is by no means a new company. In its 20-year-plus tenure, the firm has invested $2.5 billion in 120 properties across sectors; however, the firm has typically remained a low profile. To find out more about the company's new investment strategy and goals, we sat down with Katsumi Nakamoto, president and CEO of Diamond Realty, for an exclusive interview.

GlobeSt.com: You recently launched a new real estate investment initiative. Tell us about that initiative and how it diverges from the company's traditional investment strategy.

Katsumi Nakamoto: Diamond Realty Investments Inc. [DRI] is transitioning to an institutional grade investment firm in terms of the company size, invested capital and achieving sustainable growth.  We are well on our way to achieving the total outstanding invested capital of $500 million or greater on an equity basis within the next 12 months.  In the past four years, DRI has doubled its headcount, opened a full-fledged Dallas branch and retained professionals who are highly respected in the multifamily, student housing, industrial and financial industries. Under my direction, DRI's goal is to become a high-profiled real estate investment firm with its profit and growth rivaling those achieved by the ”big players” in the U.S. real estate industry.   

This is a departure, even for the company with 20-plus years of history having developed more than 120 multifamily, student housing and industrial properties with a total development cost exceeding $2.5 billion. DRI will continue to be a wholly owned U.S. subsidiary of Mitsubishi Corp., a leading Japanese trading and investment firm with a $140 billion balance sheet; however, DRI will solidify its position as a reputable, standalone and bankable enterprise in America.

GlobeSt.com: You are making a pretty sizable investment in the industrial market after a seven-year hiatus. What is happening in the industrial sector that prompted you to get back into the game?

Nakamoto: DRI finds the availability of construction financing for industrial development projects in the current economic cycle to be limited compared to other asset types, which is presenting enormous opportunities for DRI to invest equity with a handful of experienced high-quality industrial developers.  In addition, the shift to intermodal distribution and the increase of e-commerce have changed the landscape for the retailers' supply chain requiring consolidation, revamping and the increased number of warehouse locations.  

GlobeSt.com: What are some of the other projects that we can expect from this new investment strategy, and what markets are you looking at?

Nakamoto: DRI will continue to focus on the asset types that are considered recession resistant, including Class-A multifamily, student housing and industrial.  For multifamily we are targeting MSAs with a million-plus in population and a positive job growth, balanced supply demand and good liquidity.  Currently we are looking at potential development projects in Seattle, Portland, California, Phoenix, Denver, Chicago, Dallas and Atlanta.  

Our student housing development projects are typically focused on Tier 1 schools with 15,000 students or more with a healthy growth in enrollment.  DRI's industrial development projects typically involve 200,000 square feet or greater multi-tenanted, speculative or build to suit industrial buildings located in the major logistic hubs throughout the U.S. 

Throughout all asset types DRI's preferred equity size per project is approximately $10 million to $50 million, and the maximum holding period of five years.  Our investment strategy is to team up with a handful of experienced high-quality developers for each asset type with whom DRI is able to establish long-lasting working relationships. 

In addition to the above DRI may consider making investments in developing medical office buildings, and providing mezzanine debt financing on a select basis. 

GlobeSt.com: You are entering the market in peak conditions. How are you staying competitive and winning deals?

Nakamoto: DRI's greatest advantage is its 20-plus years of track record providing equity for development projects in the U.S.  The Company's firm principal of emphasizing upon building long-lasting business relationships also distinguish us from the rest.  In addition, DRI's available capital is sourced from the principal account on Mitsubishi Corporation's balance sheet and is verifiable, and has no third-party decision-makers.  Further, the profit sharing terms DRI offers are viewed in the market as being extremely competitive.  

GlobeSt.com: What are your initial goals in launching this initiative? Do you have a specific investment volume that you expect to hit in the next 12 months?

Nakamoto: We are well on our way to achieving the total outstanding invested capital of $500 million or greater on an equity basis within the next 12 months.