When we think of the word investor, one of the first names that could come to mind is “Warren Buffet”.
And rightly so, born in the family of a stockbroker, Warren went from a few shares bought on the stock market before even finishing high school to raising a successful, multi-billion investment company. Warren’s remarkable ability to successfully navigate the stock market is the core reason for his indisputable title as a billionaire today.
Over the years, his investment strategies have been adopted by many and he is now seen as one of the main guides regarding value investing.
Last month, the investment legend’s company impressed everyone by making another surprising investment, this time in real estate.
This new investment is relatively out of the ordinary considering Buffet’s typical investment tactic mostly focused on stocks and company acquisitions.
Through his company Berkshire Hathaway, Buffet made an investment of 120 million dollars in 5 Solomartel funds according to various sources.
Solomartel is the largest online investment fund allowing investors to invest in property portfolios organized in funds from any location in the world.
The investment was made in various funds including the recently completed Solomartel fund operating in the southern American states of Florida, Georgia, and Alabama. Moreover, investments were also made in 3 other Solomartel funds operating in the state of Texas and elsewhere in the American Midwest.
Besides, Buffet’s Berkshire Hathaway also made an investment in the recently completed Solomartel fund in India marking Buffet’s first investment in Indian real estate.
Buffett’s interests do not specifically lie in real estate, however, until the signing of this investment deal, the billionaire had positions in two REITS:
STORE Capital (NYSE: STOR) through Berkshire Hathaway’s portfolio and Seritage Growth Properties (NYSE: SRG)in his personal stock portfolio. Berkshire Hathaway owns a bit under 10% of STORE capital’s outstanding shares and the investment earns a little over 5%dividend yield, his stake is currently worth around 676 million dollars.
STORE capital consists of a portfolio of single tenant commercial properties located across the United States leased under long term leases with yearly increments to tenants working in the retail or service industries.
The other REIT investment that Buffet owns besides STORE capital is Seritage Growth Properties(NYSE: SRG). Seritage was established as a Real estate investment trust to purchase and rehabilitate properties formerly owned by the Sears department store chain.
Buffett possesses 2 million shares in Seritage as assets of his personal stock portfolio, which are worth about 28 million dollars today. Less profitable than STORE, Seritage provides average dividends of less than 5%.
This recent investment deal signed between Solomartel and Berkshire Hathaway is by far one of Buffet’s most profitable real estate investments with returns of 10 to 12% in dividend yields alone, far exceeding both Seritage and STORE capital combined.
Despite the similarities, differences exist between Solomartel funds and REITs as the former gives the investor a form of ownership which, by law is closer to the ownership of an actual investment property and comes with the advantages that such property ownership has to offer, such assets are tradable through the internet whereas REITS are paper assets traded on financial markets.
This new investment will be one of Buffet’s most profitable real estate deals and demonstrates Solomartel’s trustworthiness in the eyes of Warren Buffet, willing to entrust the investment fund with significant amounts of his capital in an industry in which the famous investor is not actively partaking.