Monthly Archives: January 2018

Berkadia Acquires 50% Interest in Riverside Capital

(BRK.A), (BRK.B)

Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has acquired a 50 percent ownership interest in Riverside Capital, a full-service tax credit investment company offering capital solutions to developers of high-quality affordable housing across the country.

Riverside has guided the financing and syndication for more than 7,500 affordable units across the country, representing $900 million of equity capital.

“This acquisition gives Berkadia the opportunity to expand our presence in the affordable housing space by enabling access to a deep network of developers and investor relationships,” said Berkadia CEO Justin Wheeler. “Riverside’s reputation as an established tax credit syndication platform, with its proven track record of providing capital solutions to the affordable housing industry’s leading development companies, appealed to our desire to grow within this increasingly important asset class.”

The acquisition creates a joint venture between Berkadia and The Michaels Organization, the nation’s largest privately-held owner and developer of affordable housing. Riverside, which is national in scope, has provided tax credit syndication services for top-tier affordable housing developments across the country, including for Michaels.

“We are proud to partner with Berkadia, one of the multifamily housing industry’s most respected and successful full-service mortgage banking, loan servicing and investment sales firms,” said John J. O’Donnell, president of The Michaels Organization. “This partnership propels Riverside into a position ripe for growth as an industry-leading capital provider and tax credit syndicator for much-needed affordable housing.”

“The partnership allows us to expand Riverside Capital’s capacity while continuing to offer our clients best-in-class opportunities and services,” said Sebastian Corradino, president of Riverside Capital. During Corradino’s tenure with Riverside, the firm more than doubled its volume and expanded its originating, underwriting and asset management teams.

Consistent with this strategy of growth in the affordable housing market, Berkadia has named Steve Ervin as the head of its prominent affordable housing group, charged with growing this platform. Mr. Ervin will lead the coordination of Berkadia’s affordable debt products including Fannie Mae, Freddie Mac and HUD. In his time at Berkadia, Mr. Ervin launched the Seniors Housing and Healthcare group and is currently the head of Berkadia’s HUD production team, who was ranked #1 for volume in fiscal 2017. He will draw upon that experience to manage Berkadia’s expansion in the affordable housing industry.

In 2017, Berkadia’s loan origination volume surpassed $24 billion while its investment sales platform totaled nearly $8 billion.

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 is among the top Freddie Mac and Fannie Mae multifamily lenders.

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.

© 2018 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.

Amazon, Berkshire Hathaway and JPMorgan Chase Team Up on U.S. Employee Healthcare

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Amazon, Berkshire Hathaway and JPMorgan Chase & Co. are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.

The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.

Tackling the enormous challenges of healthcare and harnessing its full benefits are among the greatest issues facing society today. By bringing together three of the world’s leading organizations into this new and innovative construct, the group hopes to draw on its combined capabilities and resources to take a fresh approach to these critical matters.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes,” said Berkshire Hathaway Chairman and CEO, Warren Buffett.

“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

“Our people want transparency, knowledge and control when it comes to managing their healthcare,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he added.

The effort is in its early planning stages, with the initial formation of the company jointly spearheaded by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a Managing Director of JPMorgan Chase; and Beth Galetti, a Senior Vice President at Amazon. The longer-term management team, headquarters location and key operational details will be announced at a later date.

© 2018 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.

BuilderMT’s Model Expert Wins a 2018 Top Product Award from Constructech

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BuilderMT, a MiTek company owned by Berkshire Hathaway, has won its 38th technology award, the 2018 Top Product award from Constructech.

The award was earned by BuilderMT’s ModelExpert. Working in tandem with Sales Simplicity’s Feature Manager, ModelExpert is a new digital toolset for estimating any set of house plans and options that a builder can invent or configure. ModelExpert allows builders to create a standard estimating method for their entire organization, based on the way estimators naturally think about, measure, estimate, purchase, and construct house plans and options.

“ModelExpert is one of our newest modules, but it is part of a years-long commitment to integrating BuilderMT and Sales Simplicity into a single platform,” said Tom Gebes, President of BuilderMT and Sales Simplicity. “ModelExpert– offers our users more precision and effectiveness in the selling, estimating, bidding, and purchasing processes.”

© 2018 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.

Super Bowl a Super Week for NetJets

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With any big sporting event comes big money, and in the case of the upcoming Super Bowl LII, which will be played on Sunday, February 4, the week-long celebration that culminates in the NFL’s championship means a big logistical operation for Berkshire Hathaway’s NetJets.

The fractional ownership private jet company has created a temporary fixed-based operation at St. Paul’s Holman Field. The services will include a special bar and lounge for NetJets customers.

Late-January and February is a particulary active period for private jet services, and in addition to the Super Bowl, there is the Davos Economic Forum, The Grammy Awards, The Academy Awards, the NHL All-Star Weekend, and the NBA All-Star Game. Not to mention flying your sweetheart to Venice or Maui for Valentine’s Day.

It is actually Davos that has the highest concentration of the largest, long-range jets, including the Bombardier Global Express and Gulfstream 650, as people fly in from the farthest corner’s of the Earth.

Of the roughly 1,500 private jets anticipated to fly in and out of the Minneapolis area for the Super Bowl, approximately 16.5% of them will be NetJets flights.

The cost of private jets for the event are are reportedly running as high as $75,000 an hour.

Of course you do get some extra frills for all that cost. NetJets is hosting an invitation only party. The location? Well, it’s on your invitation.

© 2018 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.

McLane Company Creates Velocity Freight Transport

(BRK.A), (BRK.B)

McLane Company Inc., a Berkshire Hathaway-owned supply chain services company, has launched Velocity Freight Transport, Inc., a freight brokerage company dedicated to providing significant value to both shippers and carriers.

Led by industry veterans Ross Grier, John Lower, Aaron Keister, and Seth Arnoux, Velocity Transport aims to be a first-class freight brokerage company known for their principled approach and quality of service.

According to a company statement, the launch of Velocity Transport comes at a time when the supply chain industry is in need of fresh thinking and an updated business model to enable carriers and shippers to meet their deadlines, growth goals and retain their competitive edge. To help with this, Velocity Transport will offer competitive pricing, relentless service, cutting-edge technology and comprehensive freight solutions.

With its headquarters and operations management stationed in Plano, Texas, Velocity Transport plans to serve clients across the United States, and provide refrigerated, flatbed, intermodal, LTL, van and expedited freight offerings.

“With today’s constant shifts in consumption trends and transportation regulations, supply chain leaders in all industries are facing more volatility and challenges than ever before. We’re launching Velocity Transport to bring comprehensive freight solutions to the market and deliver a level of service that will raise the bar on the freight brokerage industry overall,” said John Lower, vice president of Velocity Transport.

“Our entrepreneurial spirit, commitment to excellence and collaborative approach will enable the Velocity Transport team to remain agile and flexible when delivering solutions. We look forward to providing an exceptional experience to the shippers and carriers in our rapidly evolving marketplace,” Lower added.

© 2018 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.

eVolution Networks Inks Strategic Deal with China’s Largest Data Center

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eVolution Networks, a Berkshire Hathaway Energy portfolio company, has announced a strategic commercial agreement with China Telecom for purchasing software licenses of eVolution’s Smart Energy Solution AI platform, generating 40% savings in Data Centers’ energy consumption across China.

The software first deployed in one of China Telecom south-west region, in some of the largest data center facilities. The agreement was signed after rigorous testing and simulations in various China Telecom data centers, earning the approval and certification of the China Telecom Beijing Research Institute (CTBRI).

eVolution’s SES is a unique and innovative AI software platform capable of using off-peak periods of services in a data centers to save significant amounts of energy. After months of testing and simulations, CTBRI approved the ability and reliability of SES and decided to implement the solution in operational data centers across China. CTBRI completed the integration of internal systems with eVolution’s SES engine and developed a custom interface to monitor, support and measure electricity savings.

China Telecom is the largest owner of data centers and Internet hosting services in China. It owns hundreds of data center facilities across the country that accommodate millions of servers. Apart from providing hosting services to other companies, China Telecom offers its own services, such as IPTV, high-speed internet, intranet services.

“This is a very significant milestone for both China Telecom and eVolution Networks,” says Adam Amitai, Chief Information Officer at eVolution. “China’s 5 years energy plan is a massive call to action for major Chinese corporations. eVolution Networks is committed to helping Chinese data centers become greener and more profitable. We are proud to have China Telecom as our first Chinese customer deploying artificial intelligence technology to reduce their carbon footprint. Our mission is to harness the power of artificial intelligence to improve the data center industry efficiency and profitability in China and globally.”

© 2018 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

Ajit Jain Not Only Helps Run Berkshire, He Owns Berkshire

(BRK.A), (BRK.B)

Newly appointed Berkshire Hathaway vice chairman Ajit Jain not only oversees all of Berkshire’s insurance operations, he has a significant stake in the conglomerate.

Berkshire’s regulatory filing this past Thursday revealed that Jain has roughly $109 million in Berkshire stock.

Jain owns $21.7 million of Berkshire stock, and also indirectly owns $87.5 million of Berkshire stock held by his wife, a family non-profit foundation and two family trusts.

The filing makes clear that Jain needs to not only stay in Warren Buffett’s good graces, he definitely need to be good to his wife.

2018 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.

Major Changes Coming With Abel’s and Jain’s New Roles as Vice Chairmen

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With Gregory Abel elevated to Berkshire Hathaway’s Vice Chairman – Non-Insurance Business Operations, and Ajit Jain appointed Vice Chairman – Insurance Operations, Warren Buffett has made clear that major changes are in store in the command structure of Berkshire’s operations.

While Buffett has no interest in stepping down as chairman, he is shifting the responsibility for both the bolt-on acquisitions and the setting of salaries and compensation for Berkshire’s managers to his new vice chairmen.

“They’ll decide the compensation of the people underneath,” Buffett explained in a January 10 interview on CNBC. “I mean, certain people we have compensation arrangements with that we will have in force for their lifetime because we made up at the time of acquisition, but aside from the ones that are fixed, those decisions will be theirs. And smaller bolt on acquisitions will probably be theirs if there’s a large bolt on acquisition, then Charlie and I will get involved.”

Berkshire shareholders apparently should have no fear that Buffett’s famed “elephant gun,” the term he uses for hunting for giant-sized acquisitions, will be silenced any time soon.

2018 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.

Only One CEO in Berkshire’s Future Says Warren Buffett

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With both Greg Abel and Ajit Jain recently promoted to the positions of vice chairman, the obvious question is will they one day be co-CEOs of Berkshire.

“No” say’s Warren Buffett, who in a January 10 interview on CNBC made it clear that there will only be one CEO.

“When I’m not CEO, there will be another CEO, Buffett explained. “There will be a CEO. And how that CEO will organize things will be up to him in this case. And he will figure out the best way to do it. And it won’t change very much. It will change a little, but it won’t change very much.”

So, will the CEO be Abel or Jain? From Buffett’s remarks it seems clear it will be Abel.

“There’s no horse race at all in these two fellows,” Buffett noted in answer to a question of whether the two are jockeying for position. “They know each other well. They like each other well. They both have their areas of specialty. I mean, Greg would not want to be running insurance and Ajit would not be running the other operations.They are extremely good at what they do. Those are two pretty different businesses. And they’re roughly equal businesses. There are more people on one side, but the insurance business generates over $100 billion of float in addition to having well over $100 billion invested in it in terms of net worth. So, there’s more or less parity of earning power and importance.”

Since according to Buffett “Ajit would not be running the other operations,” and Buffett has expanded Abel’s purview to all of Berkshire’s non-insurance businesses (a new CEO has been appointed to head Berkshire Hathaway Energy), everything points to Abel, 55, being the heir apparent for CEO.

As for other potential CEOs, Mathew Rose, executive chairman of BNSF Railway, no longer seems to be a candidate to take over the helm of Berkshire. Nor does Mark Donegan, CEO of Precision Castparts. The two executives lead two of Berkshire’s largest companies.

Buffett also revealed that Charlie Munger, who already had the title of vice chairman, would not be getting a new title, and was completely on board with sharing the title.

“It was his idea, actually, in terms of the title,” Buffett said. “I got about halfway through the first sentence, which is more than i usually get through with Charlie before he comes up with a better idea, and he just says, let’s just have three vice chairmen.”

2018 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.

Fruit of the Loom Partners with Goldbug

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Fruit of the Loom has announced a new partnership and licensing agreement with Goldbug, the largest distributor of infant and children’s accessories in the United States.

The new relationship between Fruit of the Loom and Goldbug will produce a unique product line to cover babies’ needs from head to toe, which will sell at national and online retailers beginning in spring 2019.

“As a proven leader in the baby softgoods market, Goldbug’s focus on quality and innovative design makes them the perfect strategic partner for us as we enter this category,” said Melissa Burgess Taylor, Fruit of the Loom, Inc., Chairman and CEO. “Fruit of the Loom is known for its quality, value and style, and we are excited to offer innovative products to new parents seeking a known and trusted brand for their children.”

“We are enormously proud to begin a partnership with Fruit of the Loom, an iconic American brand recognized around the world,” said Katherine Gold, Goldbug CEO. “We look forward to a long and productive relationship with Fruit of the Loom, which will allow us to grow together and develop products that offer solution-oriented, pleasing designs that parents will love.”

© 2018 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.