February 27, 2013 Comments

Markets were very strong on Wednesday with the DOW up 1.25% and Toronto up 0.6%.

Berkshire Hathaway was up 2.5%. Toll Brothers was up 2.0%.

At lunch time on Monday I bought additional Berkshire Hathaway shares paying $99.54. It ended Monday at $98.58. On Tuesday it opened at $99.05, got as low as $98.25 and closed at $98.72. Today, Wednesday it opened at $98.58, but closed at $101.21. So I did not get the best price this week and certainly I should have been buying quite some weeks ago. But nevertheless I am happy I bought some on Monday.

Target indicates it will spend $1.5 billion in capital in Canada in 2013. (possibly that was meant to include the 2012 spending). That would be on top of the $1.8 million they paid to acquire the leases (though some was recouped selling some leases to Walmart. They presumably also spent a lot in 2012. They say the stores they acquired “were in very poor physical condition”. I know the Zellers near me was stripped to the bare steel and concrete. Even the exterior walls were torn out for an expansion. They will open 124 stores. It sounds like they will have spent at least $3.3 billion on the 124 stores. That’s a remarkable $27 million per store — and they will still be paying rent. That strikes me as expensive. I don’t know how that fits in with expectations that Target will offer low prices. Consumers should not expect anything close to the U.S. prices. For may reasons they will face higher costs in Canada.

Perhaps it is a great deal for the landlords like RioCan. Target apparently pays for all these capital costs. It will be quite some years before the leases come up, but at that time the landlord would have the benefit of the renovations and be able to charge a high rent to Target.