Categories
Fruit of the Loom

Fruit of the Loom Focuses on Sustainability

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Berkshire Hathaway’s Fruit of the Loom, Inc., has recently joined The Sustainability Consortium (TSC) as part of its ongoing commitment to corporate social and environmental responsibility.

TSC is a global, non-profit organization working to transform the consumer goods industry so that mainstream consumer goods bought each day, like Fruit of the Loom products, are more sustainable.

“Operating in a sustainable manner is extremely important to all of us at Fruit of the Loom,” said Tony Pelaski, Fruit of the Loom executive vice president and chief operating officer. “As a global organization, we have an obligation to constantly evaluate and improve our sustainability practices. Joining TSC will allow us to evolve and expand our current processes to remain a sustainable organization and leader in the apparel category.

Euan Murray, TSC chief executive states, “We are thrilled to welcome Fruit of the Loom to our very active textiles sector, where they will join other TSC members to improve the environmental, social, and economic performance of the textile value chain. Fruit of the Loom’s membership with TSC and leadership in the apparel industry will us help create more sustainable products for a more sustainable planet.”

As part of The Sustainability Consortium, Fruit of the Loom will have access to one of the world’s largest research databases, which translates sustainability science and data into business tools that can be used throughout a product’s supply chain and lifecycle. Other members of TSC include manufacturers, suppliers, services providers, NGOs, civil society organizations, governmental agencies and academics.

“Fruit of the Loom is committed to conducting business in a socially responsible fashion,” said Pelaski. “The tools available to TSC members will be an invaluable asset as we work toward making products that are not only better for consumers, but also better for the environment,” said Pelaski. “We are proud to be a member of TSC and look forward to learning more from this valuable partnership.”

© 2017 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.

Categories
Berkadia

Berkadia Facilitates $60 Million Sale in Seattle

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Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has announced the recent $60.7 million sale of Carroll’s Creek Landing, a multifamily property in the Seattle suburb of Marysville, Washington. Senior Managing Director Kenny Dudunakis and Directors David Sorensen and Ben Johnson of Berkadia’s Seattle office represented the seller, Maryland-based Gateway Trident LLC.

The buyer was JRK Property Holdings, and the deal closed on August 1.

“With large floor plans at half the price of similar units in King County, Carroll’s Creek Landing offers a great living option for families in the area,” said Dudnakis. “JRK Property Holdings specializes in providing attractive affordable housing, and we were excited to work with them on this acquisition.”

Built in 2002, Carroll’s Creek Landing is located at 18111 25th Ave., affording convenient access to several nearby shopping centers. The property features two-, three- and four-bedroom apartments with dishwashers, patios and walk-in closets. Residents can also enjoy several community amenities, including a welcome center, a basketball half-court, a clubhouse with a fireside lounge and a barbeque and picnic area.

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.

© 2017 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.

Categories
Acquisitions Berkshire Hathaway Energy

Stakeholders Continue to Line Up Behind Berkshire’s Oncor Bid

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Berkshire Hathaway Energy has announced that the Texas Cotton Ginners’ Association and CMC Steel have agreed to support its proposed acquisition of Oncor Electric Delivery Company LLC (Oncor). The growing number of commitments now includes 12 stakeholder groups, including several groups – like CMC Steel – that intervened during former proposed acquisitions of Oncor.

“As we work through the approval process, we’re encouraged that our meetings with stakeholders across Texas continue to confirm that the deal we are proposing is a good fit for Oncor’s customers and Texas,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “We truly appreciate the support we’re receiving from many groups, and we’re looking forward to closing the deal and welcoming Oncor to the Berkshire Hathaway Energy family.”

Berkshire Hathaway Energy will leverage its financial strength to benefit Oncor customers and Texas. The all-cash deal includes 47 regulatory commitments and ring-fencing that ensures Oncor will continue as a strong electric transmission and distribution company.

The influential Texas stakeholder groups that support Berkshire Hathaway Energy’s proposed acquisition of Oncor include: Public Utility Commission Staff; Cities Served by Oncor; Texas Industrial Energy Consumers; Office of Public Utility Counsel; TXU Energy; NRG Energy; the Texas Energy Association for Marketers (TEAM); the Alliance for Retail Markets (ARM); IBEW Local 69; Targa Pipeline Mid-Continent WestTex LLC/Targa Midstream Services LLC; Texas Cotton Ginners’ Association; and CMC Steel. TXU Energy and NRG Energy represent two of the largest retail electric providers in Texas, with TEAM and ARM representing dozens of Texas electric market participants. ARM participating members include Champion Energy Services, LLC; Direct Energy, L.P.; NRG Retail Companies; and TXU Energy Retail Company LLC.

© 2017 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.

Categories
Acquisitions Berkshire Hathaway Energy Commentary Warren Buffett

Commentary: Familiar Territory, Berkshire Wins if it Loses

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Warren Buffett and Berkshire Hathaway look to be on the verge of winning Oncor Electric Delivery Co., a Texas-sized prize it has been chasing for the last three years, as the utility struggled under bankruptcy proceedings.

Now, all that stands in its way is a last minute bid by Paul Singer and his hedge fund Elliot Management. The hedge fund is the largest creditor in Oncor’s parent company, Energy Future Holdings Corporation.

Singer scored a recent success when Elliot Management won a delay in finalizing Berkshire’s takeover while it puts together its own offer, reportedly a $9.3 billion bid that would top Berkshire’s $9 billion deal.

The delay moves the bankruptcy court date from August 10 to August 21.

In addition to winning approval from the bankruptcy judge, any deal put together by Berkshire Hathaway or Elliott Management has to pass muster with the Public Utility Commission of Texas (PUC), the agency that regulates the state’s electric and telecommunication utilities, and must rule that any approved acquisition is in the public interest.

The PUC has already rejected two prior takeover bids for Oncor, including last year’s bid from Hunt Consolidated Inc., and April’s bid from NextEra Energy Inc. The failed deals opened the door for Berkshire’s bid.

Berkshire, which entered the energy business in 1999, has built one of the largest utility holding companies, with $85 billion in assets and $17.4 billion in annual operation revenue, as of 2016.

Unlike many failed attempts at merging utilities, Berkshire has repeatedly acquired plum assets, including MidAmerican Energy, PacifiCorp, and NV Energy, and by allowing them to retain their earnings, made them stronger than they were before acquisition.

This is not something that escapes the PUC as it considers who should supply power to 10 million Texas residents, and a host of major manufacturers that need electricity at the lowest possible rates.

As Tony Bennett, president of the Association of Texas Manufacturers, pointed out in a recent editorial, Texas companies in the Oncor service area don’t have a choice of electricity suppliers, so whoever wins the bid has to be focussed on reliable service and low rates, not just the highest return for investors. This is where Berkshire Hathaway Energy excels.

Still, like so many deals that Buffett strikes, he wins even if he loses.

What’s a Hundred or Two Million Between Friends?

Termination fees are familiar territory for Buffett, who walked away with $175 million in 2008 when he refused to get in a bidding war for Constellation Energy. French energy company EDF doubled his offer, but a pile of cash that ran into the hundred millions suited him just fine for his three month pursuit of the Baltimore-based energy wholesaler.

This time, if the Oncor deal falls through, Berkshire will receive a $270 million termination fee.

Not a bad way to lose at all.

But, I wouldn’t bet on Berkshire losing this one.

© 2017 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.

Categories
Berkadia

Berkadia Secures Loans for Buyers of Florida Keys Hotels

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Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has secured two loans approaching $14 million on behalf of Songy Highroads LLC, and the Wardman Group. Songy Highroads is an Atlanta-based real estate investor who recently acquired two hotel properties in Islamorada, one of the Florida Keys’ top destinations.

The Wardman Group is led by Thad Paul, a former Carlyle Group executive and Washington D.C. -based hotel expert.

Berkadia South Florida Senior Managing Director Charles Foschini and Managing Director Chris Apone arranged the financing.

First National Bank of South Miami provided $7.05 million to finance the acquisition of the Days Inn Islamorada Resort, a 37-unit property located about halfway between Miami and Key West.

The same lender also provided $6.8 million for the acquisition of Harbor Lights Islamorada, a similar-sized motel on five acres boasting 600 feet of Atlantic Ocean frontage. Both are five-year, fixed rate-loans, with partial interest only, at an aggressive rate.

“The typical motel in the Florida Keys is a ‘mom and pop’ operator and does not operate with a high degree of efficiency,” explained Foschini. “These motels, however, are in phenomenal locations on the ocean. Working together, Songy Highroads and Wardman recognized that operating the hotels as one will not only provide a more institutional approach to the management of the hotel, but bring a highly amenitized touch to a market starved for a quality experience in an intimate boutique setting. The lender also recognized the underlying value of the assets, and offered loan terms that were not only aggressive, but provided the capital needed to elevate the assets with upgrades, amenities and branding.”

The Days Inn Islamorada Resort is located at 82749 Overseas Highway; Harbor Lights is located slightly further south at 84951 Overseas Highway. Both are located in close proximity to popular attractions including Theatre of the Sea, Long Key State Recreation Park, Treasure Village and several diving and snorkeling sites.

Harbor Lights has been prominently featured in the Netflix hit series “Bloodline,” and maintains a cult following with fans of the show.

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.

© 2017 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.

Categories
Nebraska Furniture Mart Special Report Warren Buffett

Nebraska Furniture Mart Celebrates 80th Birthday

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These days when a company lasts a decade everyone pops champagne, but for Berkshire Hathaway’s Nebraska Furniture Mart this August marks the 80th anniversary of the company’s founding in 1937.

Founded in Omaha by Rose Blumkin (affectionately known as Mrs. B.) the company started in the basement of her husband’s pawn shop with $500 borrowed from relatives.

Mrs. B., despite being only 4 feet 10 inches tall, was legendary for her toughness and work ethic.

Her escape from Russian persecution at the dawn of WWI, when as a passport-less, 23-year-old, store clerk from Minsk she crossed the Chinese-Siberian border by promising the guard she would bring back a bottle of fruit brandy, and her six-week voyage on a peanut boat could in itself be a movie.

Unable to speak English, and as an immigrant unable to get a bank loan, she prided herself as over the years she toppled Omaha’s “Big boys.”

As NFM grew to dominate the Omaha furniture market, Warren Buffett took notice and in 1983 Berkshire Hathaway bought the store for $60 million without even doing any formal due diligence. It didn’t stop Mrs. B. from working seven days a week, and she continued to oversee the store until age 103.

Along with NFM, Berkshire owns three other furniture retailers, including Jordan’s Furniture, R. C. Willey Home Furnishings, and the Star Furniture Company.

Today, NFM is the largest home furnishing store in North America selling furniture, flooring, appliances and electronics, doing volumes with only four mega-stores that put furniture retailers to shame. Make that every other furniture retailer to shame.

The chain has four stores in Omaha, Kansas City, Des Moines, and Dallas, and a valuation of well over $1 billion.

Day-to-day operations are overseen by Tony Boldt as the president and chief operating officer, with Ron Blumkin and his brother Irv Blumkin as chairman and CEO respectively.

While all the stores are large, none is larger than the store in the Dallas area, which opened its doors in March 2015.

The newest Nebraska Furniture Mart in The Colony in Dallas, Texas, was an immediate success and adds roughly $600 million a year to the furniture chain’s revenues, which already had the highest per-store volume of any furniture retailer in the United States.

Boasting a 1.9 million-square-foot facility, and featuring a 560,000-square-foot showroom, the new Dallas NFM dwarfs even the chains other megastores.

The Dallas store is the anchor to Berkshire’s $1.5 billion Grandscape development, the first of its kind for Berkshire. The development is a 400+ acres, 3.9 million square-feet mix of retail, entertainment, dining and attractions that won’t be fully built-out for another decade.

The elaborate Grandscape complex will feature a $45 million boardwalk-themed restaurant district, a hotel and spa, a recently announced 16-screen luxury movie theater, and 1.5 million square feet of residential and office space that is billed as the lifestyle center.

It’s all a long way from Mrs. B.’s basement, and the fact that Grandscape will be another decade before its completed just means that it will be done in time for NFM’s 90th anniversary.

© 2017 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.

Categories
Insurance

Growth in North American Market to Benefit Berkshire Hathaway Travel Protection

Strong growth in the number of outbound North American travelers means solid growth opportunities for travel insurers, including Berkshire Hathaway Travel Protection.

According to the Research and Markets report, “North America Travel Insurance Market by Distribution Channel: Opportunity Analysis and Industry Forecast, 2016-2022,” the travel insurance market possesses high potential to grow in the next 6-8 years, as the present penetration level is considerably low. It is one of the niche segments as compared to other segments in the insurance industry. One of the driving factors of travel insurance is the growth of tourism industry across North America.

As the tourist traffic is growing, the associated risk (while travelling) is also on rise.

Travel insurance covers the expenses incurred and minimizes the risks during travel, which include medical treatment to patient, trip cancellation, loss of baggage, evacuation or repatriation during an emergency, loss of travel documents, and others.

The growth of travel insurance market is influenced by the growth in trend of adopting travel insurance as a prerequisite for obtaining VISA. This provision ensures that travelers are adequately covered in case of medical emergencies, owing to high medical and hospitalization cost in foreign countries. However, lack of proper knowledge in terms of benefits of travel insurance and low awareness are expected to restrain the growth of the North America travel insurance market.

According to a study, the number of outbound travelers in the U.S. was increased by 7.7% in 2015 as compared to 2014, strengthening the growth of the U.S. travel insurance market.

Moreover, 27% of the Canadian population comprises baby boomers, who have the resources and time to travel across the world. Thus, travel insurance service providers target baby boomers and amend their services to provide a better solution, which is expected to surge the demand for travel insurance in Canada. Insurance intermediaries are expected to gain high market share, owing to the growth of travel insurance among senior citizens.

© 2017 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.

Categories
Minority Stock Positions Stock Portfolio

BYD Receives Biggest Electric Bus Order in U.S. History

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Chinese new energy technology company BYD continues to dominate the market for electric buses. Its lead over other companies is ever widening, as it has landed a massive order for electric buses for Los Angeles.

In a unanimous vote, the Board of Los Angeles Metro, one of the largest transportation systems in the United States, voted to award a contract for 60 40-foot all-electric buses to local manufacturer BYD. This is among the largest single contracts for electric buses in US history, and will directly lead to 59 new manufacturing jobs at the BYD factory in Lancaster, California.

The 40-foot BYD bus has a range of over 160 miles,

LA Metro is expected to use the buses to electrify the Silver Line bus service, which runs throughout the county, from El Monte into Downtown Los Angeles and then south to San Pedro. This route covers a number of communities that have seen significant advocacy around environmental justice, with a severe need for this kind of investment in improved air quality.

“The communities along the Silver Line deserve clean air, and we’re glad that LA Metro is committing to electric operations,” said Stella Li, President of BYD America. “In addition to a quieter, zero-emissions ride along the Silver Line, these buses mean more manufacturing jobs in LA County. We’re thrilled to get to work producing these buses for LA Metro.”

This award comes weeks after BYD signed a Community Benefits Agreement with the Jobs to Move America Coalition, which includes community, faith, labor, and environmental organizations working to advance good job and equity outcomes through transit investments, and as BYD moves forward on union negotiations with the Sheet Metal, Air, Rail, and Transportation Workers Local 105. The factory in Lancaster currently employs over 700 Californians making buses and trucks.

“LA Metro is certainly right to be electrifying, and we’re particularly glad they are working with a company like BYD with a clear commitment to working with our community and labor partners to create a pipeline for underserved and underrepresented populations into good jobs,” added Erika Thi Patterson, National Policy Director at Jobs to Move America. “That means environmental justice and economic justice for people from the ports to the Antelope Valley.”

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.8 billion.

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

© 2017 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.

Categories
BNSF

BNSF Profits Close to $1 Billion in 2nd Quarter

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Berkshire Hathaway’s second quarter profits were bolstered by $958 million, as BNSF’s profits rose a dramatic 24 percent.

Higher carload numbers are continuing to bring good news to BNSF Railway as compared to 2016.

Second quarter and first six months of 2017 operating income were $1.8 billion and $3.4 billion, respectively, an increase of $300 million (20 percent) and $389 million (13 percent), respectively, compared to the same periods in 2016.

Total revenues for the second quarter and first six months of 2017 were up 15 percent and 12 percent, respectively, compared with the same periods in 2016. This is a result of increases in unit volume for the second quarter and first six months of 2017 of 9 percent and 8 percent, respectively, and higher average revenue per car/unit.

The increase in average revenue per car/unit in 2017 was primarily due to higher fuel surcharges and business mix changes as well as increased rates per car/unit.

Business unit second quarter and first half of 2017 volume highlights:

• Coal volumes increased 21 percent and 20 percent for the second quarter and the first six months of 2017, respectively, compared with the same periods in 2016, due to mild winter weather in the first quarter of 2016 and higher natural gas prices in the first half of 2017, which led to increased utility coal usage, partially offset by the effects of unit retirements of coal generating facilities.

• Consumer Products volumes were up 6 percent for the second quarter and the first six months of 2017, compared with the same periods in 2016, due to higher domestic intermodal, international intermodal and automotive volumes. The increases were primarily due to higher market share, improving economic conditions and normalizing of retail inventories.

• Industrial Products volumes increased 4 percent and 2 percent for the second quarter and the first six months of 2017, respectively, compared with the same periods in 2016, primarily due to higher minerals, steel, and other commodities that support domestic drilling activity as well as higher taconite. The volume increase was partly offset by lower petroleum products volume due to pipeline displacement of U.S. crude traffic and lower plastics volume.

• Agricultural Products volumes were up 14 percent and 8 percent for the second quarter and the first six months of 2017, respectively, compared with the same periods in 2016, due to higher grain exports.

© 2017 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.

Categories
Acquisitions Berkshire Hathaway Energy

Oncor Plan Would Slash Rates for 54,000 Customers

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Oncor Energy, which Berkshire Hathaway is hoping to acquire through its subsidiary Berkshire Hathaway Energy, has announced that it reached a proposed settlement in its rate case, which was filed earlier this year.

The rate case settlement also garnered wide support within the industry and among consumer groups.

Some 54,000 customers scattered across North, West and West Central Texas were suffering under sky-high electric rates from Sharyland Utilities, which has the highest power delivery rates in Texas.

Consumers waged a campaign to bring down those rates, which were hitting farmers and other large energy users particularly hard.

If approved by the Public Utility Commission of Texas, consumers could expect a 40 percent drop in electricity costs. The settlement would have Sharyland customers become Oncor customers.

In a statement, Berkshire Hathaway Energy commends Oncor’s efforts to achieve a balanced outcome for customers that helps keep rates among the lowest in Texas and preserves the company’s ability to invest in its system at reasonable cost.

“Berkshire Hathaway Energy’s ownership structure is a source of financial strength that uniquely positions us to provide the resources Oncor needs to fund the new equity requirement,” said Abel.

© 2017 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.