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Mitsubishi arm plots third mezzanine RE fund

Diamond Realty Management is aiming to raise $150 million for the vehicle in what would be its largest mezzanine fundraising yet. 

Diamond Realty Management (DREAM), the real estate investment arm of Japanese conglomerate Mitsubishi Corporation, is plotting the launch of its third and largest mezzanine real estate fund in the second quarter, PERE can reveal.

While details of the fund are still being hammered out, it is understood that the firm hopes to raise as much as $150 million for the fund, which would be yen-denominated.  The firm raised $110 million for Fund II early last year.

The Tokyo-based firm is expected to target domestic investors for this fund, primarily pension funds looking to diversify into property. DREAM declined to comment on its fundraising.

To date, the firm has invested $700 million in mezzanine loans in Japan, mostly for core or value-added assets.

In a departure from DREAM’s strategy for its previous funds, the firm is this time around expected to include development projects within the property types it is willing to lend to, partly in response to overcrowding and widely accessible liquidity for standing assets. It may also partake in deals which involve senior debt from Mitsubishi.

In an effort to give investors comfort with the fund, DREAM is understood to be planning only to launch the vehicle once 50 percent of its transactions have closed, perhaps during Q2, 2014. The capital for these deals would come from Mitsubishi’s balance sheet initially before being transferred into the fund after launch.

With a total $4 billion of assets under management, DREAM has managed 13 private funds since its 2004 founding as well as a private open-ended REIT, which it is understood to be looking to increase hopes to $2.5 billion of assets in three years up from $1 billion currently.