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Culture, architecture, and hospitality in the Algarve

The Addresses is a new hospitality brand that offers up beautifully designed custom houses for rent in the Algarve region of Portugal. Designed by Lisbon-based architects, atelier RUA, the company’s initial houses include a former fish warehouse that was renovated with both modern and traditional Portuguese touches.

Alongside these retreats, the company (by way of a partnership with Studio Stories) also offers its guests curated “experiences.” This is all part of the company’s focus on culture, architecture, and hospitality.

I am a big fan of these design-forward hospitality companies, which offer experiences that you could probably describe as existing somewhere between a traditional hotel and an Airbnb. Similar to the latter, they are decentralized and they are focused on authentic and local experiences.

But they also come with a particular set of sensibilities — and perhaps some consistency — that you could argue starts to reflect your favorite hotel. Another more local example is Canadian-based Hinter, which I discovered and blogged about last fall.

When I checked this past winter, Hinter’s houses were booked up several months in advance. This tells me that there’s more than a few people who are hungry for these sorts of travel experiences. At the same time, I think it speaks to the tremendous value that you can create with beautiful architecture and design.

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Internal locus of control

Before bed last night, I came across this New Yorker article from 2016 that I thought was fascinating and broadly useful for both life and business. In it, Maria Konnikova talks about how people learn to become resilient. And she starts by citing the work of a developmental psychologist and clinician who spent decades studying why some people seem to manage stress and trauma far better than others. Here is an excerpt talking about why that might be the case:

From a young age, resilient children tended to “meet the world on their own terms.” They were autonomous and independent, would seek out new experiences, and had a “positive social orientation.” “Though not especially gifted, these children used whatever skills they had effectively,” Werner wrote. Perhaps most importantly, the resilient children had what psychologists call an “internal locus of control”: they believed that they, and not their circumstances, affected their achievements. The resilient children saw themselves as the orchestrators of their own fates. In fact, on a scale that measured locus of control, they scored more than two standard deviations away from the standardization group.

It immediately reminded me of something that Steve Jobs once said in an interview back when more people wore buttoned up jean shirts. His comment was that one of the most powerful things you can learn in life is that much of what surrounds us was created by people who are no smarter than us. His point being that everything can be altered. We all have that ability. We are “orchestrators of our own fate.”

The article goes on to argue that one of the ways we can exhibit a strong internal locus of control is by learning to view and respond to situations in a productive way. Put differently, whether or not we are subjected to shitty experiences matters less than how we ultimately react to and view those shitty experiences. If you can reframe and place in positive terms, then you can reduce any perceived stresses and become more resilient.

The good news is that, supposedly, these are skills that can be learned. So if this topic is at all interesting, I would encourage you to check out the full article. It certainly caught my attention before bed last night.

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The price of lumber is up about 193%

Many of you are probably acutely aware that the cost of lumber has risen dramatically over the last year. Builders are building and many people seem interested in renovating their home right now — so demand is outstripping supply. But here is a chart from Fortune, with data from Random Lengths, showing you just how wild things have gotten. Back in April 2020, lumber was going for about $358 per thousand board feet, according to this data. As of the beginning of this month, the number had jumped to $1,048, which represents an all-time high and a 193% year-over-year increase. Who knows where pricing will go next, but the National Association of Home Builders is estimating that current pricing has added about $24,000 to the price of a typical new single-family home in the US.

Image: Fortune

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The sources of wealth

Back in the old days, and by the old days I mean the 1980s, there were a handful of ways in which you were likely to get rich. You either inherited it, or you made it in oil or real estate. The Forbes list of the 100 richest Americans was first published in 1982 and, at that time, 60 of the people on this list had inherited their wealth. Of the 40 new fortunes on the list, about 60% were primarily related to oil or real estate. If you couldn’t inherit your money, these two industries were a good place to start.

But as Paul Graham explains in this recent essay about “how people get rich now,” this is no longer the case. On the 2020 list, there were 73 new fortunes, but only 4 stemmed from real estate and only 2 stemmed from oil. As you might imagine, today’s biggest driver is what we call tech and, more specifically, it is people founding tech companies (there are also a couple of examples of early employees doing very well). Of the 73 new fortunes last year, approximately 30 came from tech, including 8 of the top 10 fortunes on the list.

Given how many people are starting new companies today (it has become easier and cheaper) and given how many of these companies are quickly growing to big valuations (things are scaling faster), it is perhaps tempting to think about this period of time as being entirely unprecedented. Never before have we seen so many young people getting rich by starting their own company. And never before have we seen such inequality.

However, Graham argues in his essay that this period of time is the default. What we saw in the second half of the 20th century was actually an anomaly. Indeed, if you go back to the end of the 19th century, the richest people in the US were mostly people who were starting their own companies and taking advantage of new technologies, such as that of mass production.

His claim is that for the most part it wasn’t really viable to start your own company in, say, the 1960s. Instead, most people simply went to work for a big company that had some sort of oligopolistic positioning in the market. And it turns out that was pretty good for maintaining a strong middle class. Less people were getting fabulously rich. I’d like to see some more data points around entrepreneurship and wealth during this era. But regardless, I think it’s pretty clear that the dominant sources of wealth have changed.

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Building on top in London — how airspace developers are creating new housing supply in a tight market

London has a breed of specialist developers that are known as rooftop or airspace developers. What these developers do is build on top of existing and occupied buildings — mostly residential. Firm examples include Upspace and Apex Airspace. According to this recent WSJ article, the city is also making moves to relax regulations so that more of these top-ups can be completed.

Brokerage Knight Frank estimates that in central London alone there are probably 23,000 buildings that could support a few extra floors, resulting in upwards of 41,000 new homes. I have done early feasibility studies for similar projects here in Toronto and they’re not simple to execute. But building structures are typically constructed with a factor of safety and so, in some/most cases, you can build a little on top without doing any additional reinforcing. (Note: I am not a structural engineer.)

In any case, the benefits of airspace projects are obvious. You’re creating additional supply in a tight housing market like London. Similar to Toronto’s laneway housing program, it’s not going to completely solve the larger problem of affordable housing. But every bit of new housing helps, regardless of where it lands on the spectrum of affordability.

One of the drawbacks, which is the headline of the above WSJ article, is that penthouse residents are getting demoted in the process. They’re going from penthouse to sub, or sub-sub, or sub-sub-sub penthouse. They also need to endure a bit of construction right above them. Cry me a river?

But what is also important to point out is that there are lots of buildings out there which are facing capital expenditure shortfalls. They have maintenance and repair demands that simply aren’t adequately funded. Adding additional floors can be a way for these buildings to generate that cash and, in some cases, residents are even partnering with airspace developers to share in some of the profit upside.

Not surprisingly, these sorts of arrangements are seemingly being met with a fair bit of support. Because in these instances, your options are basically as follows: Either you cut a repairs and maintenance check right now or you support a bit of development and then hopefully you’ll be the one receiving a check in the future. I suspect we’ll be seeing a lot more of this, not just in London, but in cities all around the world.

Photo by Sometimes I Snap on Unsplash

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A circular spaceship in Winnipeg

Winnipeg has a building along its waterfront that, I am told, is affectionately referred to as the “spaceship.” Designed by the award-winning architecture practice, 5468796, the spaceship is a 41-unit circular condominium building that is raised up on 35 foot stilts in order to fabricate views outward from the site. Sans stilts, the site wouldn’t have really had any.

The raised up portion is made up of two circular floors, each with 20 identical units (so 40 in total). The 610 square foot units are all pie-shaped studios that splay outward to a 22 foot wide living room/bedroom. Supposedly, a circle creates 30% more perimeter glass than if the building were orthogonal. So good for views. I should know this.

The building is organized around a central core and circulation system. The building’s common area corridors are also open and exposed to the elements. A fascinating design decision given the climate in Winnipeg, and most of Canada. But this would be good for build costs, good for the building’s overall efficiency/loss factor, and probably pretty good if you’re worried about things like airborne viruses.

Completed in 2017, the hard cost budget for the project was supposedly $4.75 million. The developer in me is wondering how the hell they built 28,000 square feet for $170 per square foot. And the Torontonian in me is aghast at studios as large as 610 square feet. These would be generally sized 3 bedroom suites here in Toronto (I kid).

On top of the building’s two floors is also a pretty unique penthouse suite that can be rented on Airbnb for what looks to be a reasonable price. The main living space is essentially a glass box with 360 degree views of the city. I am ashamed to say that I have never been to Winnipeg. But as soon travel resumes and these provincial boundary checkpoints dissolve, I think it might be time for a trip to the spaceship.

All photography by James Brittain Photography

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Just how valuable is public transit?

Benjamin Dachis and Rhys Godin of the C.D. Howe Institute have a new report out talking about the effect of COVID-19 on the future of public transit in Canadian cities. In it, they make the argument that public transit is a key enabler of the agglomeration economies that make cities so valuable. And right now, most people aren’t using it (see above).

Why are agglomeration economies so important?

According to some studies, doubling the population of an urban area has tended to increase mean incomes by between 3-8%. In the Canadian context, similar research has found that people living in more populated regions (cities) tend to have incomes that are between 3-5% higher than those living in more rural areas. So when it comes to average incomes, bigger cities tend to be better. (Does Zoom change this? I’m not convinced.)

Of course, to make bigger cities function properly, you generally need public transit. And when you do have fast and reliable transit, that, they argue, is going to help drive the agglomeration economies which ultimately help to increase incomes. Because of this important relationship, Dachis and Godin argue that Canadian governments have a habit of systematically undervaluing the importance of transit investment.

If you’re interested in reading the full report, click here.

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How the world changed over the last 37 years

Google Earth has a feature called Timelapse that combines millions of different satellite images to show you how the world has changed over the last 37 years — sometimes for the better and sometimes for the worse. It’s a feature that’s been out for a few years, but they just made it available in 3D. Some of you may have also missed the feature if you don’t normally use Google Earth. So here’s an overly wondrous video (also embedded above) showing off the new feature, and here is a dedicated site that allows you to quickly try out Timelapse in 2D. Dubai’s “coastal expansion” is one of the places you can quickly land on and its growth over the last few decades is always mind boggling to see. But of course, there are also many other important Timelapses that should be viewed. A number of them speak to our environmental impacts on the world.

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Essential food logistics

Blair Welch, co-founding partner of Slate Asset Management, was recently interviewed by Don Wilcox of RENX about the company’s recent acquisition of the Commercial Real Estate Business of New York-based Annaly Capital Management. As part of the deal, we also acquired $0.4 billion of grocery-anchored real estate assets across the US. These were purchased by Slate Grocery REIT (TSX: SGR.UN). What some of you maybe don’t know, though, is how we as a company view these kinds of assets as being essential food infrastructure, more so than as being retail assets. So here are a few excerpts from the article and quotes from Blair that explain why, in our view, this distinction matters.

“We started buying grocery-anchored real estate in a big way in the financial crisis and I think we always looked at grocery-anchored real estate as food logistics, rather than a retail play,” Welch explained. “In the pandemic it’s really proven the local food store, or the spoke in the hub, is just as valuable as the hub itself.”

Despite an increase in online grocery shopping (to about 10 per cent in the U.S.), people are still going to the stores. Or, at least, (are) getting their products from the local stores. Again, think “food logistics.”

“That (10 per cent bought online) means 90 per cent is done in store,” Welch observed. “Now, here’s the interesting thing. Over 90 per cent – probably closer to 95 per cent – of the online sales are done at the local store.

“So what we are saying is over 99 per cent of all the sales are done at the local stores, whether it is click and collect, or someone delivers. You are not changing the distribution pattern.”

Here are a few more words and a comparison to what Amazon is and has been doing when it comes to food logistics:

“If I’m Kroger or Walmart if I have to pay $10 (per square foot) for my warehouse what’s the difference if I’m paying $10 for my store? It’s the same cost, they just look at it as a distribution cost,” he said.

However, those stores are in the middle of most neighbourhoods. Exactly where Amazon wants to be.

“I think Amazon is an amazing company. I think their acquisition of Whole Foods and others is actually to get closer to the consumer. And the Whole Foods (acquisition) was just under 400 grocery stores in a market of 35,000 stores.

“If I am Walmart with 5,000 stores or Kroger with about the same under different banners, that infrastructure is extremely valuable.”

Slate will soon own more of it.

For the full article, click here.

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New York City rolls out contactless fare payment at every single subway station

I’m late to the party here, but I was reading this morning about how New York City recently completed the rollout of its One Metro New York (OMNY) fare payment system. What this does is allow you to use contactless payment systems, like Apple Pay, to get on the subway. ONMY is now available across the five boroughs on every bus and at all 472 subway stations (feel free to impress your friends at virtual parties with this stat).

Metrolinx here in Toronto is similarly piloting contactless payments on the Union Pearson Express. You now have the option of tapping a credit card, a phone, or a watch. Maybe this doesn’t seem like such a big deal, but I still remember when the PRESTO payment card was first rolled out — it felt late to me. Apple added near-field communication (NFC) to iPhone in 2014, and at that point I think it was fairly obvious that standalone payment cards wouldn’t be around much longer.

That time has arrived for New York City and will be hopefully arriving shortly for Toronto. And I think it will be particularly useful for tourists who may not have a Metrocard (NYC) or PRESTO card (Toronto) and just want to jump on a train. I’ve only taken the subway a handful of times during this pandemic, but I’ll be back at it once the world fully resumes. And I definitely can’t wait to take the UP Express to the airport again (and to the Junction).