Berkshire Hathaway Invests In Store Capital By Acquiring A 9.8% Stake

Store Capital Corp, has disclosed that Berkshire Hathaway has acquired a stake of approximately 9.8% in the real estate investment trust. The investment worth $377 million is a bet by Berkshire Hathaway that some storefront types will still attract shoppers despite the fact that online industry is dramatically changing the retail industry in the United States.

Store Capital, which is based in Arizona, is insulated from the problems affecting the traditional retail industry to an extent since its biggest investments are in properties that are categorized as single-tenant such as fitness centers, veterinary clinics and chain restaurants.

“We’re devoted to doing service-sector investments…where you can’t buy these services through the internet,” Christopher Volk, the chief executive officer of Store Capital said.

Real estate bets

With the investment, Berkshire now becomes the third-largest shareholder of Store Capital after Fidelity Management & Research Co and Vanguard Group. Berkshire’s acquisition of a stake in Store Capital comes days after the conglomerate put in approximately $302 million in Home Capital Group Inc, a Canadian mortgage lender. The Warren Buffett-led investment firm is looking for new investment options as its cash pile keeps growing. By the end of March earlier in the year, Berkshire Hathaway held cash totaling $96.5 billion.

Berkshire Hathaway was first contacted with an invitation to invest by Volk in 2014 and Buffett responded within a couple of hours requesting for additional information. Buffett then acquainted Volk with one of the portfolio managers at Berkshire – Ted Weschler, who continued to follow the financial results of Store Capital. A little over a week ago, Weschler informed Store Capital that the conglomerate was ready to invest in the real estate investment trust. Volk revealed that Berkshire did not request a seat on the board of Store Capital.

Growth of ecommerce

In 2016 Store Capital disclosed that it was planning to invest in real estate amounts totaling approximately this year. But with the investment from Berkshire, Store Capital now has the capacity to invest more than that according to analysts. Some of the largest customers of Store Capital include a preschool chain, a chain of movie theaters and a furniture retailer based in the Mid West.

During last month’s Berkshire shareholder meeting, Buffett admitted that he failed to profit from online shopping growth though he also revealed that the furniture business that the conglomerate wholly owns had not been affected by online shopping.

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