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Berkadia

Berkadia Secures Loans for Buyers of Florida Keys Hotels

(BRK.A), (BRK.B)

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.

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Nebraska Furniture Mart Special Report Warren Buffett

Nebraska Furniture Mart Celebrates 80th Birthday

(BRK.A), (BRK.B)

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

(BRK.A), (BRK.B)

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

(BRK.A), (BRK.B)

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

(BRK.A), (BRK.B)

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.

Categories
McLane

McLane Company and Love’s Travel Stops Extend 21-Year Relationship

(BRK.A), (BRK.B)

Berkshire Hathaway’s McLane Company, a leading supply chain services company providing grocery and foodservice supply chain solutions, has renewed its service agreement with long-time customer Love’s Travel Stops.

As part of this extended agreement, McLane will continue to deliver to more than 430 Love’s stores across 41 states, as Love’s Travel Stops continues to add approximately 40-50 stores per year.

“McLane continually shows commitment to our business. McLane’s Center for Category Innovation assists our team with exceptional category management resources enabling us to grow sales year over year,” said Mark Romig, director of merchandising at Love’s Travel Stops. “McLane’s national scope allows us to achieve our growth goals while meeting the needs of our Customers in an efficient way.”

“Love’s provides a rewarding experience for its customers and we are honored they chose to continue to utilize our best-in-class resources. McLane’s procurement, technology and operations provide our customers superior service and consistency of performance as well as expanded product offerings, regardless of location. As Love’s continues to expand their network, McLane will be there to assist in reducing cost and driving efficiency at retail,” said Vito Maurici, senior VP of sales of McLane Grocery.

© 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
Berkshire Hathaway Specialty Insurance

Berkshire Hathaway Specialty Insurance Establishes Dublin Office

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance Company (BHSI) has established a new office in Dublin, Ireland, and appointed Cormac McNamara as Property & Casualty Manager, BHSI Ireland.

“Cormac will build our local team and lead our efforts to bring all of BHSI’s Southern European underwriting capabilities to Ireland,” said Tom Bolt, President, UK and Southern Europe. “We are excited to further expand our geographic footprint in the region as we steadily grow our underwriting capabilities as well.”

Cormac comes to BHSI with 24 years of experience in the UK and Ireland insurance markets. Cormac spent the last six years at MS Amlin/Mitsui Sumitomo Insurance Group, where he held a variety of underwriting positions, most recently Ireland Underwriting & Distribution Manager. Before Mitsui Sumitomo, Cormac was Commercial Insurance Manager, UK Region and Ireland, at Chubb Insurance Company of Europe, and held several other underwriting positions at Chubb prior to beginning his career at QBE Europe.

© 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
Berkshire Hathaway Energy

Berkshire Hathaway’s Utilities Save Millions in Q2 Thanks to EIM

(BRK.A), (BRK.B)

Several of Berkshire Hathaway’s utilities, PacifiCorp and NV Energy, saved millions so far this year through the western Energy Imbalance Market (EIM).

The California Independent System Operator (ISO) reported that the western Energy Imbalance Market produced benefits of $39.52 million in the second quarter of 2017. The benefits since the western regional market was launched in 2014 now total $213.24 million.

In 2014, Berkshire Hathaway Energy’s PacifiCorp agreed to become the first participant in a new Energy Imbalance Market (EIM) as a way to balance electricity in-flows and out-flows on a regional basis and bring millions of dollars in benefits to participating utilities.

During the most recent three-month period, PacifiCorp saw benefits of $8.81 million, and NV Energy total benefits in April and May were $4.62 million, while June benefits are still pending data verification.

The EIM began financially-binding operation on November 1, 2014, by optimizing resources across the ISO and PacifiCorp’s balancing authority areas (BAAs), which includes California, Oregon, Washington, Utah, Idaho and Wyoming.

The EIM improves the integration of renewable resources and increases reliability by sharing information between balancing authorities on electricity delivery conditions across the entire EIM region.

Portland General Electric plans to enter the EIM in October 2017, followed by Idaho Power and Canada’s Powerex in April 2018. The Balancing Authority of Northern California/Sacramento Municipal Utility District, Seattle City Light and Los Angeles Department of Water and Power will begin participating in April 2019. Salt River Project of Phoenix is slated to enter the market in April 2020.

The EIM’s state-of-art technology automatically optimizes the real-time grid to find low cost energy regardless of its location to serve consumers in California, Arizona, Oregon, Washington, Utah, Idaho, Wyoming and Nevada.

Excess renewable energy in one area can be used to serve demand in another seamlessly and effectively, avoiding turning off clean energy resources when not enough local demand exists to use it. Another benefit comes from reducing the amount of energy flexibility reserves utilities must carry to manage load and supply variability, as they can tap into resources outside of their service area to serve their load at less cost.

During Q2 2017, the western EIM helped improve use of renewable resources that is estimated to have reduced carbon emissions by 28,700 metric tons. These emission reductions were made possible by using 67,055 megawatt-hours of excess renewable energy that otherwise would have been turned off.

“The EIM had another strong quarter,” said ISO President and CEO Steve Berberich. “The western real-time market is a proven platform for utilities to find and use low-cost energy that produces substantial cost savings — and it will only get better with seven more utilities preparing to join the market by 2020.”

© 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

Berkshire Supports Oncor’s Plan to Swap Assets with Sharyland

(BRK.A), (BRK.B)

Berkshire Hathaway has no problem with Oncor planned asset swap with Texas utility Sharyland.

Oncor announced that it had entered into an agreement with Sharyland to swap assets in a transaction valued at approximately $400 million.

Under the terms of the proposal, Sharyland will exchange their retail distribution assets and retail distribution operations for a set of Oncor’s transmission lines in West and Central Texas.

Sharyland and Sharyland Distribution & Transmission Services (SDTS) will transfer to Oncor their retail distribution assets and retail distribution operations located in their Stanton, Brady, and Celeste (SBC) service territories, as well as their McAllen service territory.

Oncor will transfer to SDTS transmission lines of similar value located in West and Central Texas, which Sharyland will operate on behalf of SDTS.

The proposed transaction also means that Sharyland’s approximately 54,000 retail distribution customers will become Oncor customers and, as a result, will see significantly reduced regulated retail delivery rates.

In a statement, Berkshire Hathaway Energy said applauds Oncor and the various stakeholders for developing solutions to ensure continued safe, reliable, and affordable service for customers.

“The problem-solving culture demonstrated by Oncor and its management team will be a great fit with Berkshire Hathaway Energy,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “The conditions of the agreements are examples of Oncor’s strong commitment to customers; that same commitment is reflected across Berkshire Hathaway Energy’s businesses.”

© 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.