Skip to content

Let's keep in touch

Subscribe to our newsletter for timely insights and actionable tips on your real estate journey.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions
BlogsDo You Have a CLUE ?Mr. Buffett's Sweet Deal

Posted almost 15 years ago

Mr. Buffett's Sweet Deal

This is all conjecture on my part. I’m by no means a conspiracy nut. I just want some thought given to a couple of things.

 

Unless you have been on vacation for a month and no access to any form of media, we know Mr. Buffett “invested” $5 Billion in Bank of America. Now mind you, BOA stated officially that they didn’t any type of capital infusion. They were just fine, thank you. I can only guess BOA saw some advantage to taking Mr. Buffett up on his generous offer.

 

Being an “oracle”, as some call him, Mr. Buffett wanted something in return. Here’s what he received from BOA;

 

"The Deal"

A yield of 6% on PREFERRED STOCK, not common stock (he went to the head of the line)

 

Warrants to buy 700 MILLION of BOA shares at $7.14 per share, guaranteed for 10 years. (NOTE: Think of a warrant is a guaranteed option to purchase.)

 

My thoughts

 

I think he got much more. Has Mr. Buffett set himself up to make one of the Real Estate Investor Deals of the Century? Think about this: a couple of weeks ago, the treasury dept. was asking Private Equity Co.’s to look at taking down chunks of Fannie, Freddie, FHA, USDA, ect., REO. See where I’m going? These folks don’t fart without making money.

 

 

Mr. Buffett’s got the cash. Treasury has the property. If Mr. Buffett negotiated a Homerun deal with BOA, think what he could do with the Treasury Department! I’d ask for the portfolio to be marked- to- market and then offer 15 cents on the dollar.

 

 

Comments (8)

  1. Bryan,as of today, I think BoA is starting to look at plan B, no pun intended.I wonder if the FHFA lawsuit filed yesterday against the TBTF's regarding MBS quality will be the final nail for BoA. I'm curious as to why now? I just worry about a bank run at this point.

    Mike Morrison, almost 15 years ago


  2. I think BOA is in a lot worse shape they they are leading on!

    Bryan Hancock, almost 15 years ago


  3. Chris, no problem. BoA is in no position to purchase anything that is not on margin.Plus,I would scream from the roof tops if they did.Think about it; BoA originates a loan & is carried at par.F/F buys the loan. F/F sells the loan back to BoA at a discount!! I should have been more clear. Mr. Buffett, through one of his companies would purchase the properties.

    Mike Morrison, almost 15 years ago


  4. Jeff, Mr. Buffett has been to one or two rodeo's. I would have been a fly on the wall when while the deal was done.

    Mike Morrison, almost 15 years ago


  5. So who would purchase the properties, BofA because buffet put the capital in or Buffet because he has the capital? Trying to figure out how the BofA deal fits into taking down chunks of FNMA portfolio - unless the point is that he can do it and the bofa deal proves he has the pull to get it done? Sorry - im just a simple investor, LOL!

    Chris Clothier, almost 15 years ago


  6. Has used an awesome tactics? Might he be thinking to do so?

    Jeff Morris, almost 15 years ago


  7. Jon he's going to have to.I've always said- Inmvestors will lead us out of the darkness & provide REAL Liquidity to the market.The Fed's need to get out of our way.

    Mike Morrison, almost 15 years ago


  8. Not a bad theory. Is he going to hire us to manage his massive new RE portfolio?

    Jon Klaus, almost 15 years ago