Investment Portfolio Profiles
The following sample deal profiles are representative of the disciplined approach to loans and investing and that Diamond’s management members have completed across various economic cycles. The names of the firms have been modified for confidentiality and privacy reasons.
General Contractor (GC), Washington, D.C.
GC, a general construction-master glass installer, is an LMI minority-managed firm, located in an underserved area of Washington, DC. More than 75% of its employees live in LMI communities.
A member of the firm led a $1.7 million senior debt commitment to GC in 2010 for partnership capital and the acquisition of a building for expansion of its operations. GC had been in operation for 7 years, had revenues in 2009 of $10.7 million, profitability of 12%, and was cash flow positive. GC is projected to grow to $45 million in five years as a result of the signature of contracts in the $60 million range as it became an 8(a) firm. GC has the right to execute an additional $50 million asphalt contract with a duration of 10 years in its pipeline, as well as provide flooring parts for skyscrapers in the region. GC is a graduate of a major multi-billion dollar Construction company school of contracting and has a partnership with them on many projects such as BRAC, Metrorail development, and general construction.
The company is expected to provide steady cash flow in the federal markets sector and would be a prime target for the Partnership to issue up to $2 million in subordinated financing to assist them in the roll-up of competing firms, expand bonding capacity, and to expand into other regions without severe pressure on cash their flow. Our projected investment of $2 million in subordinated debt with warrants would yield a 2.0x return on capital and a 33% IRR.
Global Protection Services (GPS), Urban City, NC
GPS is a rapidly growing, 200 employee security firm that provides security and staffing around nuclear plants and higher security sites. Its CEO is an African-American woman who owns 100% of the firm. The majority of the employees are minority persons of which at least 50% reside in LMI communities.
A member of the team led a senior debt placement of a $500,000 line of credit in 2010. GPS was tracking to double its 2009 revenues of $3.5 million in the first 8 months of 2010 and was tracking a revenue growth of 40% YOY. The annualized revenues were expected to be $20 million by FYE 2011 with a profitability of 20%.
The Partnership would invest $2 million in convertible debt note of 20% with a preferred interest coupon of 8%. GPS has contracts with top energy firms such as Duke Energy and Southern Company. It just won a bid in competition against 40 firms to do security on a $2.6 billion project. GPS has been added to the GSA schedule. The Partnership would be able to exit in three years with a multiple of 2X money and an IRR of up to 40%.