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Berkadia

Berkadia Negotiates 2,826-Unit Portfolio Sale

(BRK.A), (BRK.B)

Berkadia has announced that it successfully negotiated the sale of the 2,826-unit Star Portfolio consisting of 11 separate apartment communities located in four states – Maryland, Pennsylvania, North Carolina and South Carolina. The purchase price for these assets was in excess of $300 million.

Berkadia’s Senior Managing Directors Scott Melnick and David Oakley negotiated the transaction on behalf of the buyer, Morgan Properties JV, an affiliate of Morgan Properties, one of the nation’s largest multi-family owners. Deutsche Bank represented the seller.

All of the Star Portfolio properties are located in very desirable, high-barrier submarkets in close proximity to major development hubs and public transit. Morgan Properties will execute an extensive, multimillion dollar value-add repositioning plan in aggregate to enhance the value of each property, and the renovation strategy will include premium kitchen and bath renovations and top-of-the-line amenity upgrades.

The six suburban Maryland apartment communities include Silver Spring Station, Westerlee, The Willows, St. Mary’s, Taylor Park and Willowood; in Pennsylvania, The Greens at Westgate; in South Carolina, The Waterway and Forest Oaks; and in Raleigh, North Carolina, Falls Creek and Heather Park.

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.

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Lubrizol

Lubrizol’s Particle Sciences Signs Deal with Glenmark for Cancer Drug

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Particle Sciences, a division of Berkshire Hathaway’s Lubrizol, has signed a deal with Glenmark Pharmaceuticals for the development and marketing of a generic version of the cancer drug Abraxane.

A Glenmark press release stated “The company has entered into a strategic development, license and commercialisation agreement with Particle Sciences Inc to develop and market a generic version of Celgene’s Abraxane product – paclitaxel protein (albumin)-bound particles for injectable suspension.”

Particle Sciences will develop the product exclusively for Glenmark, which is making a generic version of Celgene’s Abraxane, a drug that had worldwide sales in 2015 of $967 million.

Abraxane is prescribed for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within 6 months of adjuvant chemotherapy.

“The partnership is a significant development in Glenmark’s complex generics strategy and we are pleased to collaborate with Particle Sciences given their strong technical capabilities and understanding of particulate injection products. This is a challenging product to develop and we expect it to remain a limited competition opportunity,” said Glenmark Pharmaceuticals’ Robert Matsuk, president – North America and global API.

Under the terms of the agreement, Particle Sciences will receive milestone payments during various stages of the product’s development from Glenmark, including royalties on sales.

About Particle Sciences

Acquired by The Lubrizol Corporation in 2015, Particle Sciences is a leading contract drug development and manufacturing organization with a comprehensive suite of services for the formulation, analysis and production of complex drug delivery solutions.

© 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.

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Minority Stock Positions Stock Portfolio

BYD Expanding California Facility

(BRK.A), (BRK.B)

Chinese vehicle and battery maker BYD Company is adding 40,000 additional square feet to its existing facility in Lancaster, California. The move comes as the company continues to make in-roads in selling its pure electric buses and medium- and heavy-duty trucks in the U.S. market.

“The people who work at BYD’s Lancaster plant are assembling buses for transit systems all over the country and soon we’ll be able to increase production line capacity to deliver these cutting-edge zero emission vehicles even faster to customers,” BYD America president, Stella Li, said in a statement.

BYD plans a third phase of expansion that will bring the facility to full capacity.

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 $1.77 billion.

No telling how much Samsung’s shares will appreciate, but they obviously want in on a company that is quickly becoming leading company in both the IT industry and automobile industry.

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.

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Kraft Heinz

Kraft Heinz Keeps Fullerton Factory Open Due to Lunchables Demand

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Kraft Heinz has decided to keep open a factory in Fullerton, California, which it had scheduled to close at the end of 2016.

In November 2015, the company announced its plans to reduce excess capacity by closing seven manufacturing facilities, including the Fullerton plant which employs 430 people.

The plant makes Lunchables, a prepackaged lunch for kids that is sold under the Oscar Mayer brand. According to the L.A. Times, the company reports it is facing “an undersupply of Lunchables.”

The move to keep the plan open comes after Teamsters Local 952 ratified a new 3-year Agreement that raises wages but cuts some Kraft Heinz’s health care costs.

According to the Teamsters, the Agreement “included minor concessions and significant improvements to the H&W with no employee contribution for the first year and minor employee contribution rate for each of the following years. The Agreement also includes yearly wage increases of thirty-five (0.35) cents on Jan. 1st of each year of the contract. Additionally, workers secured a pay-out of the Productivity Bonus of three thousand ($3,000) dollars which will be paid out thirty days after ratification as well as a severance package security going forward.”

© 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.

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Dairy Queen

Dairy Queen Goes All In On Snacks

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Dairy Queen has unveiled a new line of oven-hot snacks, a first in the quick-service restaurant category. With the introduction of the DQ Bakes!® Snacks Menu, the brand is aimed at today’s on-the-go consumer looking for higher quality snacking options such as soft pretzels with zesty queso, potato skins and snack melts.

The new DQ Bakes! Snacks Menu is the first menu enhancement to come out of the DQ Bakes! Institute. The DQ Bakes! Institute was established in 2015 to inspire, develop and enhance innovation from the DQ kitchen. The DQ Bakes! Institute creates new and unique taste experiences fans can’t get anywhere else and made-to-order innovations served straight from the DQ oven.

“In developing the DQ Bakes! Snacks Menu, it was important for us to show these items are not simply smaller versions of products we currently offer like others routinely do in our category,” said Barry Westrum, Executive Vice President of Marketing for American Dairy Queen Corporation (ADQ). “Instead, they are two brand new snacks created with distinct cravings in mind. We know Millennials enjoy snacking throughout the day and relied on that insight to create a high-quality menu specifically made for snacking. Our snack menu continues to prove that the DQ brand truly listens to our Fans when creating new menu items.”

The snacks include:

• Soft pretzel sticks with zesty queso: Three soft pretzel sticks, served hot from the oven, topped with salt and served with warm zesty queso dipping sauce.
• Potato skins: Potato skins served hot from the oven filled with zesty queso cheese sauce, bacon bits, cheddar cheese and seasoned with a dash of salt & pepper.
• Buffalo chicken snack melt: Grilled chicken, buffalo sauce, ranch dressing and melted cheddar cheese inside a tortilla toasted to perfection.
• Chicken bacon BBQ snack melt: Grilled chicken, BBQ sauce, bacon and melted cheddar cheese inside a tortilla toasted to perfection.

© 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.

Categories
Insurance

Drone Insurance Anyone?

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Want to deliver pizzas by drone? Well, don’t discount the risk when grandma gets hit by a flying pizza. The new world of unmanned drones has brought with it a whole new world of liability, and for Berkshire Hathaway, liability coverage.

Berkshire’s General Star Management Company is now offering CGL coverage specifically designed to protect the manufacturers, distributors and operators of unmanned aircraft systems (UAS), more commonly known as “drones.” In addition, contingent coverage for unmanned aircraft systems operations conducted on behalf of the insured is available.

Protection afforded by the Casualty Division is targeted to manufacturers, distributors and operators of hobby and commercial unmanned aircraft weighing up to 55 lbs.

Operators must operate the devices within applicable FAA regulations and guidelines. “Start-up” as well as established entities are eligible for the new offering.

General Star will entertain UAS operators including but not limited to:

• Use of unmanned aircraft for research, governmental or commercial purposes
• Real estate surveyors using unmanned aircraft for aerial surveying
• Professional photographers using unmanned aircraft for commercial purposes

Primary limits of $1M/$2M/$2M/$1M are available for manufacturers, distributors and operators. Excess limits of $2M in addition to the Primary limits are also offered. Contingent liability coverage for UAS operations conducted on behalf of the insured offers primary limits of up to $2M/$4M/$4M/$2M and $10M excess of underlying primary limits.

Coverage for aircraft collision and for privacy violations arising out of UAS operation is included for manufacturers, distributors and operators. Written on an occurrence basis, the new protection contains no or nominal deductibles.

“We are pleased to provide our wholesale clients with a policy designed to address the unique hazards and exposures associated with one of today’s top emerging trends – drones,” said Liana Tufariello, Underwriter and Project Leader for General Star. “The popularity and usage of drones for commercial purposes has exploded, and this is just the type of E&S products liability opportunity we are eager to tackle.”

Cole Palmer, Vice President and Casualty Division Manager, added, “Responding to emerging trends, and creating new offerings for our wholesale clients to sell, are examples of how we help our clients grow their business. Innovative offerings on new technology devices, or taking a second look for creative alternatives on traditional exposures, will contribute to the growth goals of both our clients and General Star. Being a ”good steward” of an existing book is no longer a sustainable model in today’s competitive environment.”

© 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.

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Berkshire Hathaway Reinsurance Group Berkshire Hathaway Specialty Insurance Insurance

Berkshire Hathaway Turns Away From Reinsurance Business

(BRK.A), (BRK.B)

Berkshire Hathaway’s long term love affair with the reinsurance continues to wane. Over the past few years, Warren Buffett, Charlie Munger and Ajit Jain all have spoken about the changes in profitability in the reinsurance market.

The latest proof comes as Berkshire Hathaway has dropped to sixth in A.M. Best’s annual special report on the global reinsurance industry.

“The reinsurance business not as good as it once was and is unlikely to get better,” Charlie Munger said at the 2015 Berkshire Hathaway annual meeting. “Money has come in, not because they want to be in reinsurance, but because it’s an uncorrelated asset class. We’re in it for the long haul.”

“What we’ve seen from Berkshire Hathaway is that they recognize that reinsurance opportunities are not where they need to be from a pricing perspective,” A.M. Best Vice President Robert DeRose said. “They have pulled capacity back from that particular aspect of the market and they are building out insurance strategies.”

DeRose stated that Berkshire Hathaway is specifically building out that capacity through Berkshire Hathaway Specialty Insurance Co. Also, Berkshire Hathaway, through its General Reinsurance Corp. franchise, has entered into a five-year agreement under which Transatlantic Reinsurance Co. will serve as its exclusive underwriter for U.S. and Canadian property/casualty treaty reinsurance business.

© 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.

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CTB

CTB Acquires Majority Share in Denmark-Based Cabinplant

(BRK.A), (BRK.B)

Berkshire Hathaway’s wholly-owned CTB, Inc. has signed an agreement for the acquisition of a majority share in Cabinplant A/S, one of the world’s leading manufacturers of processing equipment for vegetables and fish.

Cabinplant’s poultry processing equipment complements that made by CTB’s Meyn poultry processing subsidiary.

Cabinplant A/S has its headquarters in Haarby, Denmark, west of Copenhagen, as well as having subsidiaries in Poland, Germany, Spain and the United States.

Cabinplant employs close to 300 people and has representatives in more than 30 countries worldwide. It also works in close partnership with customers in major markets around the globe. Part of its expertise includes system customization achieved through close collaboration with its customers.

Cabinplant’s systems, which feature high yield and minimal waste, are used by companies that process seafood, fruits and vegetables, poultry and convenience foods.

CTB’s chairman and chief executive officer Victor A. Mancinelli said, “The acquisition helps CTB to broaden the range of poultry processing options it can offer its customers as well as expanding into new market areas for processing, such as seafood and vegetables. Cabinplant’s knowledge of the food industry and its innovative approach to product development and implementation fit very well with CTB’s approach to its core markets.”

Cabinplant was founded in 1969. Company co-owner and chief executive officer Ralf Astrup and co-owner and chief financial officer Jan Helskov Hansen will continue in their current leadership positions. Operations will remain in the existing facilities.

Completion of the transaction is subject to applicable governmental approvals.

© 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.

Categories
See's Candies

See’s Candies to Open Store in New York City

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One thing every See’s Candies lover knows is that it’s iconic black-and-white checkered floor candy shops are ubiquitous in California, and nowhere to be found on the East Coast. That’s why travelers have long brought boxes of See’s chocolates back home with them from their trips west.

Well fear no more, as See’s has announced that it will be opening its first East Coast retail store. The store will be located at 60 West 8th Street in New York City’s Greenwich Village neighborhood, and will serve more than 100 varieties of candy—all made from scratch with quality ingredients.

This will be the first See’s location on the East Coast with a candy counter, which allows guests to build their own custom boxes of chocolates. And yes, the 625-square-foot shop will feature the iconic black-and-white checkered floor.

See’s has partnered with Bill Rhodes, CEO of Travis Melbren Inc., to open its newest shop in Manhattan in the fall of 2016.

“Hand picking treats at the candy counter has always been one of the most memorable parts about going to a See’s shop, and I’m thrilled to be able to introduce one of my favorite traditions to the residents of New York,” said Bill Rhodes, CEO of Travis Melbren Inc.

Almost a Century of Chocolate Delights

Founded in 1921 by the See’s family, See’s is headquartered in sunny California, and has over 200 retail shops across the country and an online shop that serves See’s fans around the world. See’s was acquired by Berkshire Hathaway in 1972.

No opening date for the Manhattan store has been announced.

© 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.

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Berkshire Hathaway Energy

Commentary: NV Energy Fights the Battle of Nevada

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Berkshire Hathaway’s NV Energy has been in a fight on several fronts. On one side it has rooftop solar companies, such as Solar City, trying to pitch consumers to generate their own electricity. On the other side are major casinos that are looking to dump NV Energy because they say their rates are too high.

Both MGM Resorts and Wynn Resorts are paying tens of millions to exit the NV Energy power grid on October 1.

Faced with these challenges, NV Energy is doing the smartest thing it can. It is working to cut the cost of generating electricity in order to make it the most attractive option for residential and commercial customers alike.

A proposed 100-megawatt solar project in Boulder City, Nevada, will do just that. When it comes on-line in 2018, it will produce electricity at only four cents per kilowatt-hour, which is one of the lowest costs in the United States.

The new solar energy project is the result of a Request for Proposals that was issued earlier this year. With the oversight of an independent evaluator, NV Energy signed a 25-year power purchase agreement with Techren Solar LLC to build a 100-megawatt high-efficiency single-axis solar photovoltaic project in Eldorado Valley. The project is in the development phase and, subject to regulatory approval, is expected to be operational in the fourth quarter of 2018.

NV Energy’s Senior Vice President of Energy Supply Kevin Geraghty noted that the selection criteria for the new solar project was primarily based on the best value to NV Energy customers, but also factored in economic and job benefits to Nevada.

“At an average cost of energy for the life of the project at approximately four cents per kilowatt-hour, this is one of the lowest-cost solar projects in the nation. And, we are very pleased with the fact that Techren has already signed a work-site agreement with local unions 357 and 396 of the International Brotherhood of Electrical Workers,” Geraghty said.

This is not the first low-cost solar deal for NV Energy. In 2015 it agreed to a 20-year fixed-rate contract for First Solar’s soon to be built 100 MW Playa Solar 2 at the low rate of only 3.87 cents a kilowatt-hour.

Retiring Higher Cost, High Polluting Coal-Fired Plants

The other part of the battle is getting rid of higher cost, legacy coal-fired plants. The plants not only cost a lot to run, but put NV Energy on the wrong side of green consumers.

Also in its August 15 filing, NV Energy proposed an earlier retirement date for the remaining 257-megawatt coal-fired unit at the Reid Gardner Generating Station. The proposal asks to move the original December 31, 2017, retirement date to February 28, 2017.

NV Energy already retired the first three generating units at Reid Gardner at the end of 2014, and is also exiting its participation in Arizona’s coal-fired Navajo Generating Station by the end of 2019.

Lots of Sunshine

With Nevada having an average of 294 sunny days a year, it’s one the most attractive states for rooftop solar, but that also makes it one of the best states for large-scale solar farms.

The good news for NV Energy, and all of Berkshire Hathaway Energy, is the cost of large-scale solar power generation has dropped far more rapidly than analysts had predicted.

The U.S. Department of Energy (DOE) noted that “2020 price projections are approximately one-half of what same analysts projected 5-10 years ago.”

The DOE is projecting a decline in solar PV system module prices for utility scale installations from its $4 in 2010 to less than $2 by 2016. Utility-scale PV is defined as ground-mounted systems that are greater than ≥5 megawatts.

NV Energy is betting that it can retain customers by aggressively lowering the cost of power generation with low-cost, long-term agreements, and by closing its legacy coal-fired generating plants. Its planned 100-megawatt Techren Solar project will bring NV Energy’s total renewable energy portfolio to more than 1,900 megawatts–enough energy to serve more than a million average homes.

It’s the right plan for NV Energy in the battle for the Nevada consumer.

© 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.