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Berkshire Takes 9.8% Stake in Store Capital in Property Bet

Updated on
  • Store issues 18.6 million shares to Berkshire for $377 million
  • Shares of REIT surge in early trading on ‘vote of confidence’

Warren Buffett’s Berkshire Hathaway Inc. took a 9.8 percent stake in Store Capital Corp., sending shares of the real estate investment trust surging in early trading.

Store Capital issued 18.6 million shares to Buffett’s company in a private placement at $20.25 apiece, the Scottsdale, Arizona-based REIT said Monday in a statement. That compares with Friday’s closing price of $20.77. The stock jumped to $23.30 at 7:59 a.m. in New York.

The $377 million investment by Berkshire follows a deal last week in which Buffett’s company agreed to prop up Canada’s Home Capital Group Inc. by providing a credit line and committing to take an equity stake. Store Capital focuses on transactions for single-tenant commercial properties, with occupants such as restaurants and supermarkets.

“Berkshire Hathaway’s investment solidly positions Store for continued growth,” Christopher Volk, the chief executive officer of the REIT, said in the statement. “An investment in our company from one of history’s most admired investors represents a vote of confidence.”

Store Capital had dropped 16 percent this year through Friday. Home Capital had plunged even more before Berkshire agreed to step in. Then the Toronto-based company jumped 27 percent the day after the deal was announced.

Read more: Buffett’s Home Capital Bet Backs Turbulent Canada Housing Market

Buffett has long expressed confidence in property investments to generate income for long periods of time, and to provide a cushion should the dollar lose value. He has said such bets, whether in buildings or agricultural land, are often safer than gold or bonds.

‘Double-Barreled Test’

“Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment,” Buffett wrote in a letter to shareholders in 2012. Farms, real estate, and many businesses such as Coca-Cola Co. “meet that double-barreled test.”

Berkshire and Leucadia National Corp. are joint owners of Berkadia Commercial Mortgage LLC, the provider of banking and sales services to the property industry. Buffett disclosed a personal stake in 2015 in Seritage Growth Properties, the REIT spun off from retailer Sears Holdings Corp.

(Adds Buffett’s comments on industry in seventh paragraph.)
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