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Berkadia

Berkadia Facilitates Sale of $87.5 Million Multifamily Property in Orange County, California

(BRK.A), (BRK.B)

Berkadia has announced the recent sale of Artisan Apartments, a 275-unit multifamily property located at 15555 Huntington Village Lane in Huntington Beach, Calif. Senior Directors Shane Shafer and Peter Hauser of the Irvine office negotiated the sale, which closed at $87.5 million on December 10, 2015.

The seller was Kennedy Wilson and the buyer was Domino Realty Management Company, Inc., both based in Beverly Hills. The sale price reflects a per-unit price of $318,181. Additionally, Managing Director Allan Freedman of Berkadia’s Los Angeles office assisted with the assumable financing.

“Quality of life, the strong job market and healthy apartment operations continue to support robust investment activity in the Orange County multifamily market,” said Keith Misner, head of investment sales. “Activity is brisk in the area, so Berkadia’s regional team of investment advisors and mortgage bankers collaborated quickly to execute this deal on time for both the buyer and the seller.”

“Kennedy Wilson purchased the property in June of 2012. During their time as owners, they added value to the asset through interior and exterior renovations and, as the submarket improved, was able to realize a substantial return through this sale,” said Shafer.

“Domino Realty purchased the property as a long-term hold in anticipation of the property’s appreciation and to take advantage of current cash flow and tax benefits. It also is conveniently located near additional Domino Realty-owned assets within Orange County, creating strong management economies between properties,” said Shafer.

Domino Realty plans to continue renovations to the property’s interiors, while adding additional common area amenities in order to meet renter demand and fuel strong future rental growth.

Built in 1977, Artisan’s unique layout combines three different designs: urban mid-rise units over podium parking, two-story, garden-style apartments and two-story townhouse style apartments. The 275-unit property features one- and two-bedroom floor plans. Unit amenities include fully equipped kitchens with granite countertops and stainless steel appliances, gas fireplaces, walk-in closets, cable access and balconies or patios. Community amenities include two heated swimming pools, laundry facilities, tennis courts, a fitness center, barbeques, and gated community access. The property was 97 percent occupied at the time of sale.

“Rarely does an apartment asset of this size sell in the coastal sub-market of Huntington Beach,” Hauser added. “Due to its locale, quality condition and unique unit designs, Artisan was a highly attractive investment opportunity that generated a lot of buyer interest.”

The Artisan, located near the 405 and 22 freeways and adjacent to the newly renovated Bella Terra Mall. The property is also within six miles of popular beaches and 11 miles from Disneyland. Top employers in the area include Fountain Valley Regional Hospital, StorCase Technologies Inc., IBM, Zodiac Aerospace and Hyundai corporate headquarters.

Orange County area vacancy rose 40 basis points to 4.2 percent by the end of 2015. The average asking rent increased 4.4 percent year-over-year to an average of $1,955 per month.

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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Berkshire Hathaway Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Expands Australia Team, Adds New Indemnity Policies

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance Company (BHSI) has unveiled four new executive and professional lines policies in Australia. The company also named Sami Jaghbir as Senior Underwriting Manager, Executive & Professional Lines, in Brisbane, and Richard Johnson as Senior Underwriting Manager, Executive & Professional Lines, in Melbourne.

The newly launched policies are:

• Executive First Directors & Officers Liability Insurance;
• Professional First Financial Planners Professional Indemnity Insurance;
• Professional First Asset Manager Liability Insurance; and
• Professional First Civil Liability Insurance

“We are pleased to introduce the first of our primary executive and professional lines policies in Australia, while rounding out our geographic footprint with experienced underwriting professionals now in Sydney, Melbourne and Brisbane,” said Cameron McLisky, Head of Executive and Professional Lines, Australasia.

“Our executive and professional lines team looks forward to providing tailored D&O, Financial Institutions and Professional Indemnity solutions with the security of our financial strength and long term commitment to the Australian marketplace.”

Sami Jaghbir joins BHSI after five years at Vero, where he held various positions, most recently as Underwriting Manager NSW/ACT, Professional & Financial Lines. Before Vero, he was Senior Account Executive, Financial & Professional Lines, at Marsh. Earlier in his career, he held positions at Promina, Citibank and Pfizer. A member of the Australian Professional Indemnity Group, Sami holds a Bachelor of Science degree from The University of Queensland; a Diploma of Financial Services, Broking, from the Australia & New Zealand Institute of Insurance & Finance (ANZIIF); and is currently completing a Masters in Commerce, Insurance, Accounting, Commercial Law from Deakin University.

Richard Johnson joined BHSI in October after 18 months at Catlin Australia, where he was Financial Lines Manager for Melbourne. Prior to Catlin, he held a number of underwriting and portfolio management roles with AIG in London and Australia, including Commercial D&O/Crime Underwriting Manager for AIG Europe. Richard received a Bachelor of Commerce degree from the University of Otago.

© 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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GEICO Insurance

GEICO Reaches Million Policy Milestone in Texas

(BRK.A), (BRK.B)

GEICO recently reached a significant milestone of 1 million auto insurance policies in force in Texas.

“One million policies in force in the state is a tremendous accomplishment not only our associates in Dallas, but for all of GEICO,” said Bob Miller, GEICO senior vice president. “This speaks to the continuous effort and commitment from our associates who work hard to maintain GEICO’s strong growth.”

The record-breaking policy was sold by GEICO sales agent Zachary Field of Dallas, on Nov. 28, 2015.

Texas is the fourth state along with Florida, New York and California to reach 1 million GEICO policyholders.

In early 2016, GEICO will move to a new location in Richardson, Texas, to accommodate its growing workforce in the region.

The company was originally founded in Texas in 1936 by Leo and Lillian Goodwin.

© 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 to Have Major Expansion in Charleston, SC

(BRK.A), (BRK.B)

Charleston, South Carolina will soon be home to as many as eight Dairy Queen “grill and chill” restaurants as the quick-service chain targets the city for a major expansion.

Currently, the only Dairy Queen presence are two of its more limited “treat shops” that are located in the Northwoods Mall in North Charleston and in Summerville.

Dairy Queen franchisee Brad Walker will open between six and eight “Grill and Chill” restaurants over the next five years with the first scheduled to open January 20, 2016, in North Goose Creek Boulevard.

Next up will be a location in West Ashley at a site that is still to be determined.

Brad Walker relocated to Charleston from the Midwest in order to head up the expansion.

© 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

Berkshire Hathaway’s Illinois Wind Farm Gets Approved for Construction

(BRK.A), (BRK.B)

Officials in Bureau County, Illinois, have approved Berkshire Hathaway’s proposed Walnut Ridge wind farm. The go ahead means the planned 215MW wind farm can proceed even though it was initially rejected by the local zoning board of appeals.

The Bureau County Board has approved conditional use permits that will allow the construction of 118 wind turbines. The plan was originally for up to 123 turbines, but nine were rejected as too close to a landing strip.

Walnut Ridge is located on approximately 14,000 acres of farmland in North-central Bureau County south of the Village of Walnut. This site was chosen as a location for a wind farm due to the existence of a ridge running from Mendota to the northeast and past Princeton to the south.

The project was originally developed by Edina, Minnesota-based Geronimo Energy, LLC, and was sold to Berkshire Hathaway Energy in May 2015 in a package of renewable energy projects that also included the Grande Prairie Wind Farm in Holt County, Nebraska, and a portfolio of future Minnesota solar projects.

Walnut Ridge was temporarily delayed  in May 2015 by a federal lawsuit by property owners claiming the wind farm would blight the area in northwestern Illinois.

The wind farm will make land use payments of roughly $1.2 million per year, and will pay taxes of approximately $1.6 million per year.

The General Services Administration has already entered into a 10-year agreement to buy the power generated by the wind farm.

© 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

BYD’s 300 Electric Buses Just the Start for Chinese City of Shanwei

(BRK.A), (BRK.B)

With air pollution in China making headlines almost daily, BYD Co. Ltd., the Chinese battery and vehicle-maker that is 9% owned by Berkshire Hathaway, is providing 300 pure electric buses to the Chinese city of Shanwei, in Guangdong Province. The electric buses are the first of what could be thousands for the city in the next three years.

BYD will be gradually adding the buses to the city’s public transportation fleet as the city sets ambitious goals for electric bus transportation for the city’s 409,000 population.

According to BYD, the city is purchasing the BYD K7, an 8-meter, 23-seat pure electric bus running on BYD’s proprietary Iron-Phosphate batteries, which give it a driving range of up to 240km on a single charge.

The battery packs are placed on the roof and floor, making it quite spacious inside. It also features in-wheel motors, which saves a lot in terms of maintenance costs, as well as one-button-start system and continuously variable transmission. The company touts the model as ideal for urban transit or as an airport shuttle.

Not Hundreds of Buses, Thousands

The city of Shanwei plans to have 1,810 pure electric buses in service by the end of 2017. Additionally, 1,200 units of 6-to-8-meter new energy buses will be used as short-distance transit buses in urban areas and shuttle buses in suburban areas between 2017 and 2019.

By 2019, the city of Shanwei will have a total of 3,010 pure electric buses in operation. It is the first city in China to make large-scale use of the BYD K7.

Berkshire and BYD

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

At the time, Warren Buffett said: “”We are thrilled to be partners with BYD and the people of China. Mr. Wang Chuanfu has an extraordinary managerial record, and we welcome the opportunity to work with him.”

The move has certainly worked out well for Berkshire, as BYD’s electric buses have been hot sellers not only in China, but around the world.

In September 2015, BYD scored a massive order in the U. S. from the state of Washington. BYD won a contract from the Washington State Department of Transportation (WSDOT) for up to 800 pure electric buses.

BYD’s electric car business is booming as well, and it is now the number one seller of electric cars worldwide.

Berkshire’s stake in BYD is worth roughly $1.77 billion.

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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Berkshire Hathaway Specialty Insurance Insurance

Berkshire Offers Professional Liability Insurance in Canada

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance (BHSI) has begun offering its Professional First Miscellaneous Professional Liability (MPL) Insurance in Canada.

The new MPL policy provides claims-made coverage for professionals and professional services firms facing allegations of negligent acts, errors or omissions, misstatements, misleading statements, neglect, breach of duty and unintentional breach of contract.

“Our new Professional First MPL form provides coverage that maximizes protection and results in peace of mind for Canadian professionals,” said Michael Densham, Vice President of Executive and Professional Lines, Canada, BHSI. “With our coverage and our experienced professional liability team, policyholders are assured of expert, responsive service to help them avoid claims and successfully navigate those that arise.”

The MPL policy includes the following supplemental payment coverages with no retention: coverage for pre-claim assistance, reimbursement of loss of earnings and reimbursement of expenses for policyholder attendance at litigation and disciplinary proceedings.

“Bringing to market this comprehensive MPL form with the financial strength of BHSI underscores our commitment to the professional liability market in Canada,” said Paula Lansky, Assistant Vice President, Professional Liability, Canada, BHSI.

© 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

Berkshire Increases Stake in Phillips 66

(BRK.A), (BRK.B)

Berkshire Hathaway is using the weakness in the energy market to increase its stake in refiner Phillips 66 (PSX), which has been mostly immune to the downward pressure on oil prices, as the demand for refined products, including gasoline, diesel and aviation fuel remains strong.

Berkshire picked up 35,781 shares of Phillips 66 stock on Monday, January 4, 2016, in three transactions. Berkshire bought 612,095 shares at $78.1247 per share, 126,390 shares at $79.1632 per share, and 20,810 shares at $79.6654 per share.

In August, Berkshire revealed that it owned more than ten-percent of Phillips 66, and the new purchases brings its stake to 62,294,493 shares, which is roughly 12-percent.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and in addition to its refining and petrochemical business, the company also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $94.12, and it currently pays an annual dividend of 56 cents, yielding 2.98%.

© 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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BNSF

Senators Fight Railroad Consolidation

(BRK.A), (BRK.B)

The U.S. railroad consolidation that is slowly chugging down the track with Canadian Pacific’s $28 billion bid to acquire Norfolk Southern will be derailed if two senior Democratic senators have their way.

Peter DeFazio (D-Ore.), the House Transportation and Infrastructure Committee’s ranking member, and Mike Capuano (D-Mass.), the ranking member of the Railroads, Pipelines, and Hazardous Materials Subcommittee, have written a letter to the Surface Transportation Board (STB) asking for the STB to nix any railroad mergers on the ground that it would reduce competition.

In their view, a Canadian Pacific merger with Norfolk Southern would upset the balance of power that currently exists between the seven Class 1 railroads, and would likely lead to another round of consolidations.

If Canadian Pacific and Norfolk Souther tie-up, another possible merger would be BNSF Railway with CSX to create a second railroad that stretches coast-to-coast.

BNSF Railway chairman Matt Rose recently indicated that BNSF is interested in either Norfolk Southern or CSX depending on the outcome of Norfolk Southern’s status.

“I’ve had general conversations with both of them and told them that we’re going to watch this with interest,” Rose recently told Bloomberg News.

However, in their letter to the STB, DeFazio and Capuano stated that they “have significant concerns with CP’s proven track record of boosting profits at the expense of its workforce” and “further consolidation of an already healthy industry is unwarranted.”

It’s an opinion that Norfolk Southern anticipated thanks to Norfolk Southern’s white paper by former Surface Transportation Board commissioners Francis Mulvey and Charles Nottingham, which concluded that, “As simple background, rail carriers cannot assume control of another carrier without prior STB approval. The STB’s approval process can last between 19 and 22 months. Current STB regulations, adopted in 2001, set a high bar for approval of a proposed major merger and related voting trust based on an untested public interest standard. In our expert opinions, the STB is not likely to approve CP’s proposed voting trust or the CP+NS merger.”

Now, as Congress starts to weigh in, it looks all the more doubtful that truly national railroads are in the offing.

© 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

Oregon Environmental Groups Hail Berkshire Energy’s Plan to Eliminate Coal

(BRK.A), (BRK.B)

Two west coast utilities have pledged to eliminate coal-powered electricity generation from their energy production. The utilities are Berkshire Hathaway’s Pacific Power and Portland General Electric Company.

Pacific Power serves customers in Oregon and Washington, Idaho, Wyoming, Montana and Northern California. Portland General Electric serves Portland, Salem and a total of 52 Oregon cities.

The two utilities pledged to eliminate their use of coal by 2035, and the move drew strong praise from a coalition of environmental groups that had pushed for the move. In return, the environmental groups that include the Oregon Environmental Council, Climate Solutions, and the Sierra Club, among others, agreed shelve a proposed Oregon ballot measure that would have required the utilities to get fifty-percent of their energy from renewable sources by 2040. The move for the ballot measure will be halted provided  the Oregon legislature passes similar legislation.

The two utilities have been heavily reliant on coal, with Pacific Power getting nearly 60-percent of its power from coal in 2014, and Portland General Electric Company got roughly 24-percent of its power from coal over the same period.

The proposed legislation, which would be a renewal of the Renewable Portfolio Standard that became law in 2007, would require utilities to meet renewable energy goals of 27-percent renewables by 2025, 35-percent by 2035, and 50-percent renewables by 2040.

Pacific Power is already hard at work on that goal, with the recent construction of the Black Cap Solar Facility, located on 20 acres a few miles west of Lakeview, Oregon. The 2-megawatt photovoltaic solar panel facility is equipped with a sophisticated tracking system that optimizes the sun’s power. It is also buying power from the Old Mill solar plant near Bly, Oregon, which is the state’s largest solar facility. It was built by Obsidian Renewables in 2015 on the site of a long-closed former Weyerhaeuser sawmill 50 miles east of Klamath Falls. Combined, the two facilities provide 7-megawatts of solar power.

Berkshire Hathaway and Renewable Energy

Berkshire Hathaway Energy has one of the largest renewable energy portfolios in the U.S. The company gets approximately a quarter of its generating capacity from renewable and noncarbon sources such as wind, water, solar and geothermal.

© 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.