Within the past week, Warren Buffett’s Berkshire Hathaway has made two real estate equity investments of about equal size. On June 21, it was announced that Berkshire agreed to purchase 38% of Canadian mortgage lender Home Capital Group for $300 million as well as providing a $1.8 billion line of credit at a rate of 9.5% as well as a 1.75% standby fee on undrawn funds. Berkshire is paying an average price of C$10 a share, which is 33% less than the company’s closing price on June 21.
Extensive Notes From Berkshire Hathaway Annual Meeting – May 6, 2017
On June 26, Store Capital Corp, a real estate investment trust, disclosed that Berkshire has purchased a 9.8% stake in the firm for $377 million. Berkshire’s purchase price of $20.25 per share represents a 2% discount to the stock’s closing price on June 23. Store Capital focuses on service-sector investments where there is little or no competition on the internet. The company’s biggest customers include a Midwestern furniture retailer, a large movie theater chain (AMC), and a chain of preschools. Warren Buffett stated at Berkshire’s annual meeting on May 6, 2017, that its furniture businesses, including Nebraska Furniture Mart, have seen little effect from online shopping.
Both of these investments are relatively small for Warren Buffett, but they represent large stakes in these companies.
Psychology of fear