thepupil

Why do we think he lost so much money? Last SOTP for 9984 is $250B and he may have lost 0-$4B on this trade. If they issued a press release saying they made money or lost $2B Or $5B on this, why does it matter to SoftBank? I don’t think financial loss matters much but I do wonder if trading in this size could be considered market manipulation (buying a derivative so aggressively as to manipulate the underlying) Masoyoshi is nutty but I never understand press coverage of him incinerating money. It’s rarely contextualized by the huge liquidity and low leverage of 9984 which has only improved with all the asset sales. Also IIRC, the Saudi's investment is primarily in the form of preferred stock in the vision fund. Softbank has to burn through a lot of common NAV before Saudis are impaired.

I, on the other hand, stay in the burning building and muse as to what the right value per foot is, while it gets hotter and hotter.

https://rew-online.com/rfr-closes-on-350m-deal-for-522-fifth-plans-custom-office/ more details here. the building is described as a "blank canvas" where they are looking to custom design the whole property for a single tenant for 2024 lease. tough to compare this with other space.

I don't want to make too much of one data point, but I'd say its a generally postive comp. It's a well located, but very old building that was last renovated substantially in 1998 according to what i can find. I assume there will be substantial rehab/capital to invest in addition offset by the income from MSIM's rent. it looks like some of ESRT's assets or maybe PGRE's 712 Fifth (but 712 Fifth looks nicer/higher rent), unless i'm missing something where they were renovated substantially. I could be wrong and this is testing the limits of my understanding the nuances of NYC office. Morgan Stanley wants to be in a more modern space. without knowing the economics of the leaseback it's hard to conclude much though. http://wikimapia.org/169522/522-Fifth-Avenue https://www.cmalert.com/search.pl?ARTICLE=189592

In my opinion, this is an advertisement to corporate Japan and to these companies that Berkshire is a friendly, long term oriented shareholder that is ready to make a commitment to Japan. This is not a $6.5 Billion investment in some cheap companies to double and move on. That’s how I read the release at least. I hope that in the future there may be opportunities of mutual benefit

https://www.sfchronicle.com/business/article/Pinterest-cancels-huge-SF-office-lease-in-unbuilt-15523170.php https://www.bizjournals.com/sanfrancisco/news/2020/08/28/pinterest-terminates-soma-lease.html https://sfist.com/2020/08/29/pinterest-abandons-massive-soma-office-lease-amid-surge-in-remote-work/ https://www.tmgpartners.com/portfolio/88-bluxome https://news.theregistrysf.com/alexandria-pay-140mm-88-bluxome-san-francisco-plans-project-1mm-sq-ft/ will be interesting to see what happens with this project after Pinterest cancels a huge lease

so this makes intuitive sense, but in 2005 (Katrina Rita Wilma), the last really bad season, Berkshire was flat in terms of underwriting profit. I don't know about Louisiana, but it's my impression that Berkshire has all but left the Florida Wind reinsurance market given that this was priced down to levels that they deemed not interesting. With all due respect and sensitivity to those involved in this catastrophe, I doubt it will be a material use of cash for Berkshire. 2005 Annual Report

also i think it's veyr hard to pin down a "value per foot" for anything because this stuff is not fungible. the differences in quality/occupancy/term/etc. are pretty wide between an individual REITs own buildings and then between the various REITs, and then between cities and property types etc.

this is still how I feel about all this discussion. I agree with LearningMachine's point as it relates to the operating leverage in a building. There's a good chapter in Jim Grant's book "the trouble with prosperity" that outlines the history of a single building (40 Wall Street) from its construction right before Depression to when the Donald takes it over for basically nothing outlining the cyclicality in valuations/rents of this single asset over the years/decades. I recommend the book in general. https://en.wikipedia.org/wiki/40_Wall_Street I think it's very difficult to analyze the macro and have zero answers to the "what's the rent per foot / value per foot, 3 years out" as I don't think that's underwriteable and is a cause for the general puking of these stocks. Can only observe the present de-rating, the balance sheet/leases/liquidity/quality of individual companies and decide whether or not its a good risk reward. I think this is a very unsatisfying answer and makes one feel like a sucker. But i think any bull or bear who tells you occupancy/rent per foot / whatever with any degree of precision is probably kidding themselves. I think bifurcation and a flight to quality is also likely. I own a mix of truly trophy/high quality and more commoditized stuff. In some cases (PGRE) my bear case on the more commoditized stuff is about 2/3 lower than peak prices on an asset basis. I hate to always go back to the individual stocks, but it's the only way in my view to meaningfully frame the risk/reward or what may happen in certain scenarios. As an example, PGRE owns 1325 AoA. I'm marking this at $360mm ($450 / foot. 13.5% gross rental yield, ~7% cap rate before taking into account some known/likley moveouts/bk's) in my base case and at $180mm (an unscientific 50% haircut) in my bear case ($225 / foot). this building was marked at $595 million in PGRE's 2014 IPO. I do this for their 3 unlevered buildings and get 30-60% of the stock price (bear to base) and they have 20-23% in net cash), so from cash and unlevered buildings I get 50-83% of stock price. Then I value the two trophy assets at a 6 cap (1633 and One Market), which is a significant haircut to recent trades/refinances and get equity stakes worth 30-60% of the stock price. In my bear case on those I cut the equity in half on the 6 cap. For example, 1633 broadway in a bear case is at $1.675B (they sold a recent stake at $2.4B asset value) with $1.25B of debt = $375mm equity value ($337mm for PGRE's stake). the financing is in place for 9 years and the buildings is throwing off $80 mm of cash flow after w/ long lease terms, so 4x net cash flow for the equity it feels pretty bearish to me. All in before I get to the other 8 buildings, I'm at 80-150% of the stock price. In my bear case, I assume they give up every other building and the stock has 18% downside on value basis (but would surely go down even more). so I'd repeat that to me it feels like there are a ton of problems "priced in", and that the risk/reward is asymmetric to the upside. I could be wrong and shit could be worse than I expect. Maybe my bear case haircuts of 1/3 (asset level, 50% equity level trophy asset w/ long term financing in place) to 2/3 (commodity w/ known move-out / vacancy) aren't bearish enough. Maybe NYC will be driven into the ground by its leadership. Maybe not. who the hell knows. I sure don't. we'll just have to see how dumb this post looks in a few years.

https://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/i-hate-this-post/msg235122/#msg235122 There was an extensive argument / discussion about this in 2015. I was arguing along the lines of you and cited Brooklyninvestor’s work as evidence. Then Berkshire deployed a large chunk of its cash to buy PCP and continued to reiterate they had more cash to deploy and I revised my view that Berkshire held 100% of float in cash/short term fixed income (to something lower) Since then of course, cash and FI has built back up I think it’s fair to say that Berkshire can deploy a bunch of capital at once if there’s an opportunity, but that the steady state is excessively capitalized / about 100% of float (or more) in cash/FI. This creates some quasi permanent cash drag on steady state ROE, but also increases safety as I don’t think all of it is required by regulation or anything like that.

Eric, I think this is our way of saying we are of no help. That said I am impressed by your fundraising skills/connections and wish you luck!

I use interactive brokers to buy high quality real estate. Very low commissions regularly calls with off market deals.

I have invested in i-bonds before and looked into EE bonds. The payoff structure is such that I’d rather just buy a whole life policy (which are also very low returning, tax efficient, and take a super long time to break even). Probably similar IRR at year 20 and you get a death benny

i don't think a bumpy 3-4% / year ($15-$20B) is a crazy guess. If they don't do a big acquisition/net stock purchases, they need to buy like 25 yards/yr or so just to stay cash neutral. I agree that Berkshire is price sensitive, maybe some years its 1% or some years its 5%. But to see them actually executing at about max volume is a positive foil to the strawman that Berkshire will forever accumulate excess captital. We're moving in the right direction 2018: $1.3B 2019: $4.8B 2020: $9.5B+ If 3-4% then that's about the same as S&P 500's net buyback + divvy yield, not that that matters.

https://www.google.com/amp/s/therealdeal.com/2020/08/07/kkr-teams-up-with-dalan-on-big-brooklyn-multifamily-buy/amp/ KKR buying shiny new Brooklyn portfoli for $675K/ unit. It was rumored to be in talks originally at $980K/ unit. It didn’t mention average rent/unit. Just a data point / context for EQR at $370K EV / unit and the type of haircut people are taking. Of course only 9000 of EQR’s 78K are in NYC they are at average $3900/month versus total EQR of $2800. I’m not saying all of EQR is “worth” $675K just pointing out that there’s a real post COVID trade at that level.

This could be wacky and I have no position in BAC or WFC ( I outsource that to Berkshire) but is there any thought that there was a gentle nudge from regulators that in exchange for going up to 25% on BAC, he should not be the top shareholder of other mega banks for systemic reasons. I assume he just wants to blow out of WFC and that’s that, but just throwing it out there

bloomberg tracks historical ownership. Berkshire share ownership of WFC for select dates: 1999: 57mm 2000: 15mm (it went down?) 2001-2005: 100-110mm 2005: goes down then goes up to 190mm 300mm by 2007/8, peaks at 495mm in 2015 then down to 345mm at last disclosure. I have no idea as to the accuracy of that or if WFC ever split stock or did stuff that distorted those figures. Bloomberg estimates that the total current position has a cost basis of $21-$25/share, which is great in that Berkshire is likely for the most part realizing losses as it sells (as with the airlines) and has realized $7.5B of losses through Q2. I wonder if this sparks any further actions in the stock portfolio with highly appreciated / stagnant positions.

I think we are starting to see a ceiling put on excess capital. I (and everyone) expected this Pre-covid when they announced fully discretionary repurchase and then covid delayed it; but it seems like excess capital build has plateaued and 4-5%/year share count reduction should be a reasonable base case assuming share price cooperates

obviously won't happen, but I think it would be legendary for Berkshire to just unload all it's AAPL stake and be like "yea we're still bearish, 260 yards of cash seems right, haterz gonna hate" at 15% of volume assuming no block trades, it would only take 40-50 trading days.

well he is about $50B pre-tax of AAPL wealthier. needs to buy everything else to rebalance. A whole lot has changed for the better since March.

https://www.wsj.com/articles/why-your-house-could-be-your-best-performing-asset-class-11596629101?mod=hp_featst_pos4 it's all kind of particularly funny for me, because I've always been the "don't buy a house, buy stocks" guy amongst my friends/acquaintances, but then Federal Realty Trust tried to raise my rent from $3,100 -->$3,500 and the personal circumstances allowed for a house purchase and I begrudgingly bought in a bidding war and that's done much better than any other pre-covid investment. Anyways, I thought America (and to a much greater extent Canada, Australia, certain parts of Europe) were WAY too crazy about housing and I feel like covid has put steroids into that mentality, not to mention record low rates. there's massive unemployment, but for the well-off/employed, I feel like SFH is going to be ridiculously well bid. Obviously that's already playing out, but what I mean is that covid is going to reinforce the american (and world) psyche of being obsessed with allocating too much $ to their houses. I bought my house for a 2% cap rate, so it's a double with only 100 bps of cap rate compression ;D

I thought the same, but then covid happened and my diversified liquid real estate stocks went down 30-50% and my illiquid levered and concentrated suburban single family home went up in value by 5-10%, so what the hell do i know?

Flood insurance is not bad in my experience, but wind can be really bad. My parents house is worth 2x mine and is 3x the size, but their home insurance is 25x in cost (that’s not a typo).

Agreed that there will be blood in office; we also don’t know if this is to replace their existing footage at 770 Broadway or in addition and the terms/ price. I do think it really helps the overall tone in terms of keeping office space (and high paying jobs in the glorious yuppie playgrounds that are NYC/SF/LA/DC etc) as a weapon in the war for young talent at tech/finance etc.

I promised myself I'd bump this thread when Facebook leased at Farley. of course my office stock picks are still underperforming stinkers. this is not a gloat. but I would say that leasing in general has been "wait and see, if up for renewal, renew" with a few big new leases like TikTok in NYC at 4 times square, Facebook at Farley Post office, etc.