Monthly Archives: March 2016

BYD’s Pure-Electric Buses Hit the Streets in London

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Double-decker buses are synonymous with London, and soon they will be synonymous with clean, pollution-free transportation.

Chinese battery and vehicle manufacturer BYD Co. Ltd. has delivered the first of a fleet of five pure-electric double-decker buses that will shortly be entering service on Route 98 operated on behalf of TfL by Metroline.

BYD is working with TfL and Metroline on an introduction program, which includes driver training and the installation of fast charging equipment at Metroline’s Willesden Bus Garage in north London.

The 100% BYD designed and developed vehicle is 10.2m long, features full air conditioning, and offers seats for a total 54 passengers with a further 27 standees spaces (total passengers: 81).

The bus is powered by BYD’s Iron Phosphate batteries that deliver 345 kWh of power, and can run for up to 190 miles of typical urban driving according to the internationally recognized SORT test conditions.

Recharging the bus takes just four hours and can be completed overnight using low-cost off-peak electricity. The single charge cycle is expected to be more than enough to handle most daily duty cycles.

“The Mayor of London challenged us saying that he did not believe an electric double decker was technically feasible but we took up the challenge and in less than two years created the bus Londoners can see today,” said Isbrand Ho, Managing Director of BYD Europe. “This is not a hybrid bus but a totally emissions free product which will give London a world leading position in its efforts to improve air quality.”

Leon Daniels, TfL’s Managing Director for Surface Transport, said: “BYD are a brilliant supplier. They lead the world in electric bus technology and we thank them for their efforts to make this new double decker a reality.”

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkadia Provides $44 Million in Financing for Multifamily Property in Chicago Suburb

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Berkadia has announced the financing of York Brook Apartments, a multifamily property located at 100 E. George Street in Bensenville, Illinois.

Managing Directors Len Deering and Paul Matusiak of the Chicago office negotiated the 35-year, fixed-rate refinancing loan for the borrower, YB Partners.

The $44.08 million loan was originated through Berkadia’s HUD/Federal Housing Administration program. The loan features an 80 percent loan-to-value ratio and a 35 year amortization schedule.

“Our team was quite familiar with this repeat client and carefully worked to obtain attractive terms that met their needs,” said Deering. “An uptick market-wide occupancy coupled with rising asking rent prices makes Chicago an attractive market, one that is expected to see more upside for the duration of 2016.”

The 571-unit property sits on nearly 28 acres of land and was 98 percent occupied at the time the loan was secured. Located approximately eight miles southwest of Chicago O’Hare International Airport, York Brook Apartments offers one- and two-bedroom floorplans and unit amenities such as open kitchen plans, individually controlled heat and air conditioning, private patios and balconies, dishwashers, garbage disposals and furnished rental options. The community, set in a park-like area that includes a lake, offers tennis courts, pools, storage lockers, fitness centers, a laundry facility, free aerobics classes and 24-hour maintenance.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA. The company was among the top Freddie Mac and Fannie Mae multifamily lenders for 2013.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

India Latest Country for BYD’s Pure-Electric Buses

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Bangalore has been dubbed the “Silicon Valley of India,” but it’s also a city choked by air pollution that on some days is twice as bad as Delhi’s notorious pollution.  And as much as 20% of the city’s total exhaust is produced by diesel buses.

Those skies took the first tiny step to becoming cleaner, as Chinese battery and vehicle manufacturer BYD Co. Ltd. has sold its first pure-electric bus to the Bangalore Metropolitan Transport Corporation.

“Operating electric buses not only to initialize and support new technologies, shows our respect to the city and urban residents with our social and environmental responsibility,” stated the Transportation Minister.

Although the electric bus comes with a higher initial price tag, officials expressed confidence that the total cost of ownership for the vehicle would make initial investments well-worth the price.

“The list of vehicle benefits is long; including the fact that it is quiet, does not pollute, and has low operational and maintenance costs. The bus has been operating successfully in various European countries besides China,” officials said.

Lower Cost of Fuel

Given the difference of the electricity price and diesel price, the BYD electric bus is not only zero emission but also has higher economic value.

Traditional diesel buses consume 0.55 L of diesel per kilometer in India, but by comparison, BYD’s 40 foot all-electric bus only consumes about 1 Kwh electric per kilometer (with no HVAC). The results are that millions in cost savings can be realized in Bangalore.

Last year, the Indian government reviewed the “national electric vehicle plan (2020)” and announced that India planned to put in place as many as 6-7 million new energy vehicles by 2020. The national heavy industry ministry is responsible for implementing the plan.

“The ambitious plan will promote the development of new energy automobile industry, the industry enterprises with large scale operating experience and strong technical strength, such as BYD will benefit the most,” a Hong Kong based observer said.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BNSF Drops Grain & Pulse Crops Shipping Prices

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With low crude oil prices putting a major dent in BNSF Railway’s shipping demand, the freight railroad has cut its price for shipping grain by $100 a carload.

BNSF also cut the rates $75 per carload for shipping pulse crops, such as peas and lentils.

BNSF’s total carloads for coal are down 32.2% year-to-date through March 21, 2016, for petroleum they are down 26.57%, and for metallic ores, carloads are down 32.53%. The drop in shipping volume has the railroad idling hundreds of locomotives.

BNSF’s drop in rates has especially benefits Montana’s farmers. Lola Raska, the Executive  Vice President of the Montana Grain Growers Association, noted that the cut in shipping costs helps the farmers that held on to their wheat in the hopes that demand would firm up.

Approximately 80-percent of Montana’s wheat is moved by rail for export.

In November 2015, Combined U.S. rail grain shipments hit their highest levels in five years, and the number of days behind schedule dropped dramatically.

At its low point in June of 2014, the average delay for grain shipping for BNSF was a whopping 32 days, but that delay has now evaporated due to the drop in carloads of coal, petroleum, and metallic ores, and through improvements in track and signalling that the railroad made in 2015.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

SolTrans Orders Pure-Electric Buses From BYD

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Chinese battery and vehicle manufacturer BYD Co. Ltd. continues to make advances in the U.S. bus market, picking up its first pure-electric bus orders for the public transit system serving the southern California cities of Vallejo and Benicia.

The Solano County Transit (SolTrans) in Vallejo, California, has ordered two forty-foot zero emission electric buses from BYD’s U.S. division, BYD Coach & Bus. The buses will go into service in the summer of 2016.

BYD notes its K9 40-foot bus is the most popular electric bus platform in the world, with more than 6,000 now running in revenue service in cities from Los Angeles, to London and Hong Kong.

Public transit systems are increasingly turning to pure-electric buses as they work to meet stricter carbon emission goals. The prior generation of hybrid buses are now aging out of service, and BYD’s pure-electric buses are ready replacements.

“This is a historic moment for Solano County,” said Mona Babauta, Executive Director of SolTrans. “This decision, supported by the SolTrans board of directors, is an excellent example of the forward-thinking attitude towards technology and transportation that contributes to making Solano County a great place to live. ”Our decision to go electric includes taking positive steps towards reducing greenhouse gas emissions, reducing our dependence on petroleum, and cleaner air,” continued Babauta. In addition “these buses are whisper-quiet, and will drastically reduce noise pollution along their daily routes.”

BYD’s Battery Electric bus employs many advanced technologies developed in-house by a staff of more than 15,000 R&D engineers, and includes the BYD Iron-Phosphate battery which boasts the only 12-year-battery warranty in the industry. Combined with BYD’s proprietary in-wheel hub motors and regenerative braking system, the BYD battery electric bus offers the lowest life cycle cost of ownership. The BYD electric bus delivers a host of operational and environmental benefits for public transit riders, bus operators and residents of the community — it is very quiet and ensures a comfortable ride without vibrations, jerks or the noise associated with the conventional buses and combustion engines. The bus can also drive for more than 155 miles, even in heavy city traffic, on a single charge.

As of April 1st, 2015, BYD bus fleets had completed greater than 100 million miles in revenue service, and have been evaluated by more than 150 cities in 36 countries around the world.

To date, BYD has built over 7,000 electric buses globally, making it by far the most popular electric transit vehicle on the planet.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Dairy Queen Looks to Conquer Massachusetts

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The cone with the curl on top will become a much more common sight in Massachusetts when Dairy Queen goes forward with a major planned expansion across the Bay State.

Massachusetts does love its ice cream. The Bay State ranks in the top ten of most ice cream consuming states.

Dairy Queen has announced plans to rollout 60 new stores with potential locations including the towns of Taughton, Peabody, Burlington, Plymouth, and the city of Worcester.

While there is already a modest number of locations in Massachusetts, there is currently only one location that sits in the western half of the state. The location is a “Grill & Chill” restaurant in Chicopee, Massachusetts.

In keeping with Dairy Queen’s strategy, the restaurants would all be franchises, and would be built over the next five years.

Dairy Queen has been focusing on state-wide expansion as of late, and is in the midst of building 75 new Dairy Queen Grill & Chill restaurants in South Carolina in 2016.

DQ a Winner for Berkshire

With 6,700+ locations worldwide, Dairy Queen is far smaller than McDonald’s or Burger King, but to its advantage it has only three company owned stores. The cost of the bricks and mortar are born by the franchisees, and Dairy Queen makes its money from franchise fees and a percentage of the sales.

Each franchise pays a $35,000 franchise fee, a royalty fee of 4%, and a marketing fee of 5% – 6%.

In the aggregate the franchises net Berkshire Hathaway hundreds of millions a year on its investment of only $585 million. Increasingly Dairy Queen is making that money year-round as its stronger focus on its food business, including its new DQ® Bakes! line-up, has customers seeing it as more than just a summer treats purveyor.

For more information read a Mazor’sEdge special report on Dairy Queen.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Encore! Coverage Focuses on Discontinued Products, Retroactive Limits and Liability Trigger Conversion

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General Star Management Company, a wholly-owned subsidiary of General Reinsurance Corporation, a Berkshire Hathaway company, has launched “Encore!”, a trio of specialized product liability coverages.

The three different coverages are designed to protect manufacturers, importers and distributors from product liability exposures arising out of discontinued products, mergers or acquisitions, or other past product exposures.

The coverages include:

• Discontinued Products coverage is available on both occurrence and claims-made forms, depending on individual risk characteristics. A three year policy term is standard and can be increased to five years where eligible. With premiums that are fully earned at inception and non-adjustable, the policy offers a single aggregate for the policy term. Additional insured status for the purchasing company is an option, subject to eligibility requirements. General Star provides primary limits of up to $2,000,000; excess limits are available depending on the applicant’s risk profile.

• Retroactive Limits of Liability provides protection for a merger or acquisition scenario in which the seller has no or inadequate product liability coverage. General Star provides claims-made coverage with limits of up to $1,000,000, with a one day policy term and a customized reporting period designed to meet the requirements of the merger/acquisition. Retro dates of up to five years are available, subject to eligibility.

• Liability Trigger Conversion provides “Nose” coverage under a variety of scenarios when a business converts its liability insurance from a claims-made to an occurrence form. Protection is provided on an occurrence basis, with a Liability Trigger Conversion endorsement. Nose coverage is provided on a one year term and is renewable annually. Limits of up to $2,000,000 per occurrence are available for eligible applicants. Excess coverage will be considered on a case-by-case basis.

“We are pleased to announce this branded platform of specialized product liability coverages,” said Cole Palmer, Vice President and Casualty and Professional Division Manager. “Encore!” represents a distillation of 25 years of General Star expertise with wide ranging product liability exposures, and with the changes in product lines or ownership faced by manufacturers, importers and distributors.”

Marty Hacala, President & CEO, added, “The ‘Encore!’ brand is General Star’s latest expression of its commitment to the product liability marketplace. With unsurpassed financial stability, a veteran corps of underwriting and claims professionals, and an enduring appetite for the most challenging parts of the product liability life cycle, we are pleased to bring these strengths together under the ‘Encore!’ banner.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Swinomish Tribe Maintains Lawsuit Against BNSF Not Preempted by Federal Law

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The Swinomish Indian Tribal Community’s lawsuit against BNSF Railway is not preempted by the Interstate Commerce Commission Termination Act according to the tribe.

In papers filed in a Washington federal court as a part of their ongoing lawsuit, the tribe argued that “Actions to enforce a railroad’s voluntary contractual undertakings are not preempted by the ICCTA, because such voluntary commitments are themselves an admission by the railroad that their enforcement would not unreasonably interfere with railroad operations.”

A decision against BNSF could severely restrict the number of trains and the total number of permissable railcars that the railroad can run daily on track that crosses Swinomish tribal land on its way to the Tesoro refinery in Anacortes, Washington. It could also make BNSF liable for damages for prior trespasses and breach of contract.

The Swinomish Indian Tribal Community initially filed their lawsuit in March 2015. In September 2015, a federal judge ruled affirming the Native American tribe’s right to sue the railroad for violating the terms of a Right-of-Way easement granted to allow the railroad to cross the reservation.

The Easement Agreement enables BNSF to bring Bakken crude oil to the Tesoro refinery by crossing a portion of the Swinomish Indian Reservation located on Fidalgo Island in Skagit County, Washington.

Under the terms of the 1991 Easement Agreement, BNSF is allowed to run one 25-car train per day in each direction. The tribe sued contending that BNSF was running as many as six 100-car “unit trains” per week.

Contentious History of Rail

Train travel across the tribe’s land has a long contentious history, with the original track having been laid in the late 1800s without consent from the Swinomish or the U.S government. The tracks cross the northern edge of the reservation, and the Swinomish, as the present day political successor-in-interest to certain of the tribes and bands that signed the 1855 Treaty of Point Elliott, first sued the railroad in 1976, alleging a century of trespassing on tribal land. The resulting settlement led to the 1991 Easement Agreement that allowed only the 25-car train limit without the Tribe’s permission.

The Tribe contend in its lawsuit that “BNSF never notified the Tribe that it intended to exceed the limitation of one train of 25 cars or less, nor did it request permission from the Tribe before it began to do so.”

A Deal is a Deal

“A deal is a deal,” said Swinomish Chairman Brian Cladoosby. “Our signatures were on the agreement with BNSF, so were theirs, and so was the United States. But despite all that, BNSF began running its Bakken oil trains across the Reservation without asking, and without even telling us. This was exactly what they did for decades starting in the 1800s.”

“We told BNSF to stop, again and again,” said Cladoosby. “We also told BNSF: convince us why we should allow these oil trains to cross the Reservation. And we listened for two years, even while the trains kept rolling. But experiences across the country have now shown us all the dangers of Bakken Crude. It’s unacceptable for BNSF to put our people and our way of life at risk without regard to the agreement we established in good faith.”

Under the terms of the Easement Agreement, the Tribe agreed not to “arbitrarily withhold permission” for BNSF’s request to increase the number of trains or cars.

Is it Arbitrary?

The Tribe contends that its refusal to grant permission is not arbitrary and is “Based on the demonstrated hazards of shipping Bakken Crude by rail, paired with the proximity of the Right-of-Way to the Tribe’s critical economic and environmental resources and facilities — and the substantial numbers of people who use those resources and facilities on a daily basis — the Tribe is justifiably and gravely concerned with BNSF’s shipment of Bakken Crude across the Right-of-Way in a manner and in quantities at odds with the explicit terms of the Easement Agreement.”

The Swinomish are concerned that trains carrying Bakken crude oil run over bridges spanning the Tribe’s fishing grounds in the Swinomish Channel and Padilla Bay. They also noted that the track runs across the “heart of the Tribe’s economic development enterprises,” which includes the Tribe’s Swinomish Casino and Lodge, a Chevron station and convenience store, and an RV Park, as well as a Tribal waste treatment plant.

The Tribe noted that these enterprises are the “primary financial source for funding of the Tribe’s essential governmental functions and programs.”

The 1991 Easement Agreement granted the Right-of-Way for an initial 40-year term, along with two 20-year option periods. The current agreement will expire no later than 2071.

The tribe is seeking a “permanent injunction prohibiting BNSF from (1) running more than one train of twenty-five cars or less in each direction over the Right-of-Way per day and (2) shipping Bakken Crude across the Reservation.”

The Swinomish are also seeking monetary damages for the prior trespasses and breach of contract in an amount to be determined at trial.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Federal Judge Throws Out Duracell Lawsuit

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Duracell’s guarantee that its batteries stay powered for up to 10 years in storage is not a promise that its batteries will never leak during that period says a Federal Judge.

U.S. District Judge Lucy Koh in San Jose, California, has thrown out a class-action lawsuit against Procter & Gamble Co. and its Gillette unit for allegedly defrauding consumers in ads and packaging for Coppertop batteries containing “Duralock Power Preserve” technology.

Plaintiff Renee Punian brought a lawsuit against The Gillette Company and Procter & Gamble Company alleging that the companies mislabeled packaging on Duracell Coppertop AA- and AAA-sized batteries with the statement that Defendants “guaranteed” such batteries would last 10 years in “storage,” when in fact “Defendants’ batteries would not last for 10 years, and could damage any device in which the batteries were stored.”

In her ruling that dismissed the lawsuit, Judge Koh said reasonable consumers would understand that P&G’s representation that the batteries were “guaranteed for 10 years in storage” was simply a warranty to repair, replace or refund batteries that failed within that timeframe, and not a promise that the batteries “have no potential to leak.”

She also noted in her 33-page decision that the complaint did not identify any cause, including any design or manufacturing defect, as to why the batteries might leak.

Berkshire Hathaway acquired the Duracell Battery unit from Procter & Gamble Co. on February 29, 2016.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Johns Manville Increases Investment in Engineering Thermoplastics

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Johns Manville (JM), a wholly-owned subsidiary of Berkshire Hathaway, is expanding its glass fiber operations plant in Etowah, Tennessee, to service the increasing needs of the engineered thermoplastics industry. The expansion is underway and will be finished in 2016.

The expansion in Etowah includes a new furnace to support the launch of the next generation of global products for reinforced thermoplastic composites and further support the drive to lightweight materials use. The new furnace is scheduled to start up in August 2016, and will allow for production growth and flexibility within JM’s product families for polyamides, polyesters and polypropylenes.

“Current and future trends in the composites industry will continue to drive increasing demand for glass fiber products in transportation, electrical and consumers segments,” said Brian Sapp, Global Fibers Business Director for JM Engineered Products. “We are making this investment to support our customers’ plans for growth, and we are continuing to pursue innovations in technology and product development in fibers to support existing and future customers.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.