Warren Buffett’s Berkshire Hathaway arrives in London

“Warren is not hands on at all, but you’d be amazed at how he knows all that is going on,” says Gino Blefari, chief executive of real estate brokerage network Berkshire Hathaway HomeServices. “It’s always been the philosophy at Berkshire Hathaway that they want to find good operators and then let them operate the company.” The residential brokerage franchise business of famed entrepreneur Warren Buffett is stepping up its ambition to go global, adding new franchises that expand the network and the brand. This week Berkshire Hathaway added luxury London agent Kay & Co to its existing global network of over 275 franchises, with 48,000 agents, working out of 1,500 offices. Kay & Co is run by father-son duo Samuel and Martin Bikhit. It was established in 1982 and has three offices in central London’s Marylebone, Hyde Park and King’s Cross, with plans for another 10 over the next decade, under the new brand of BHHS Kay & Co. Launching with luxury The London luxury residential market might not be top of the list of those one might naturally pick to enter given conditions, but it forms part of a broader strategy for BHHS. “There’s definitely a focus on the luxury, because we appeal to the luxury brand,” says Blefari, pointing out that BHHS average sales prices are higher than the market average in US. “We start out with the high-end. It’s so much easier to sell the low-end from the high-end. That’s a global real estate axiom: you can sell down, you can’t sell up.” He adds: “We knew we’d be attractive to the financial markets and certainly London, being one of the main ones.” Declines in luxury prime London house prices, uncertainty around Brexit and the prospect of an additional overseas buyer surcharge have not put them off. BHHS is attempting to channel international demand to London from the US and Asia. Global brand Michael Jalbert, senior vice president of global sales for the BHHS’ franchise network HSF Affiliates, says there is a lot of cash outside the UK and a BHHS presence in London is critical. “Even before Kay & Co has launched as BHHS Kay & Co the referrals that have been going through the network to London, frankly have boggled my mind.” “Martin is participating with a number of brokers from the US in the luxury property show in Shanghai in December, and going to that population, with London as part of our package, is extraordinary.” Adding London to BHHS’ armoury is also a ploy to enhance its image globally. “It’s part of the marketing that we have. We’re an international, global company and a great deal of the high-end buyers come internationally,” says Blefari. Entering Europe But it hasn’t come easily, with the move into the UK having been four years in the making. The business has been selective in looking for the right fit and extensive due diligence has been a holdup. In 2014, BHHS announced the brand would be available for the new estate agents in the UK. Two years later the company appointed Munich-based EMEA MD Mitch Lewis, who was tasked with lining up BHHS’s first international franchisees. Lewis says: “We started looking at the [London] market two years ago. This was about getting educated on the real estate nuances, understanding who the players are. “The idea was to first find a quality company. We’re going to replicate that in other markets throughout Europe.” In the last six months the momentum has picked up. BHHS Kay & Co launched on 8 November, following the formation of a partnership with Rubina Real Estate in Berlin in April. Blefari says they want growth, with London as the gateway to the rest of the continent, but they’ll continue to be selective on which countries they choose to expand into. Ambitions for London Berlin and London happened for very different reasons. Lewis says: “I was looking at Berlin because of the fact that Germany has always been a tough customer when it comes to bringing a real estate franchise-based concept onto their soil. “Victory in Berlin is one hurdle accomplished and it opens the company up to mainland Europe. With London there’s all the macro-economic reasons for us to be there in the long-term.” BHHS will rely on Kay & Co to drive growth in London and, in keeping with Buffet’s style, Blefari says BHHS won’t be too hands on. “Within the coming years we would like to deliver complete coverage of prime and outer prime London – still luxury. Essentially Highgate to Wimbledon and Holland Park to Canary Wharf. That’s what we want to able to comprehensively cover,” explains Kay & Co managing director Martin Bikhit. He adds that build to rent will be a big opportunity area and the business will seek to expand to other key UK cities further down the line. New markets For the last six years BHHS has been a residential offering but it will also be launching a separate part of the business: Berkshire Hathaway Commercial Real Estate. The new brand will launch in the US early next year and it will be driven by up to 15 of the existing franchisees, which have separate commercial divisions. “Our plan is to have it be a standalone commercial franchise. This means a completely separate offering from Berkshire Hathaway HomeServices – a new brand, logo, headquartered in Irvine, California, but led by regional brokers who will focus solely on commercial real estate,” says Blefari. “We’re going to build this offering, launch it in the US and then take it international.” This could include retail, offices, industrial, land, hospitality and hospitals. It’s everything outside of residential, says Blefari, and market demand will dictate the direction. The first step Global expansion will likely follow the route of the residential component, targeting international financial hubs. Lewis explains: “The work we are doing with BHHS is a primer for that. When we go into a market we’re looking very deeply, talking with companies, finding out who is who. Do the companies that we’ve already established an alliance with already have the capability to do commercial?” Expansion to London is just the first step. “Our objective goal is to first identify the markets and then find the Kay & Co in each one of those markets,” he adds. BHHS is working to build a presence in Milan, Paris, Vienna, Dubai, and Jalbert points out there are commercial opportunities in Hong Kong and Tokyo too. Blefari acknowledges that the Berkshire Hathaway brand is not yet established in the UK, with awareness largely being tied to the notoriety of Buffett. But, with its aggressive expansion plan, the company’s name may soon become as familiar as the celebrated businessman himself.