Buffett unit invests in Scottsdale land trust

RUSS WILES

A unit of Warren Buffett’s Berkshire Hathaway group has invested $377 million in a highly profitable Scottsdale finance company, after watching it for three years.

STORE Capital Corp. announced the transaction Monday morning. The company said it sold 18.6 million shares to National Indemnity Co. in a private placement. The transaction will give the Berkshire Hathaway unit a 9.8 percent stake in the Scottsdale real estate investment trust or REIT.

STORE Capital’s stock was trading sharply higher on the news.

STORE will use the proceeds to repay debt, fund further property acquisitions and for other purposes, including working capital. The company employs 70.

The investment represents a vote of confidence in the 6-year-old Scottsdale company, which provides financing for roughly 1,750 properties in 48 states. The properties include those run by restaurants, other retailers, manufacturers and other types of businesses. Major tenants include AMC Theatres, Cadence Education and Popeyes Louisiana Kitchen.

Buffett, a legendary investor, ranked second on this year’s Forbes billionaire list with a net worth of $75.6 billion.

Christopher Volk, STORE’s president and CEO, said Buffett wasn’t directly involved in the negotiations but was aware of the investment made by his company, which holds a diverse portfolio of insurance, energy, transportation, finance and other types of businesses.

Volk noted that Buffett’s focus is on making long-term, value investments. “They don’t do (investments) on a short-term basis,” he said. “They follow companies for a considerable time first.”

REITs have been under pressure lately owing to interest-rate risks and other concerns. That put STORE Capital’s shares in an enticing price range from Berkshire Hathaway’s point of view.

“When the stock hit an attractive value, they approached us and gave us a call,” Volk said.