Month: October 2017

• Strandkorb — a low tech solution to the elements

  I recently discovered this marvelous chair (image from here):

  

  It’s called a strandkorb, which is a German word that translates into something along the lines of “hooded beach chair.” It was invented in the late 19th century by a basket maker looking for protection from the elements on the beach.

  Apparently they are fairly ubiquitous at resorts along the North Sea and Baltic Sea and are a bit of a cult object in Germany. They are a symbol of holiday fun, but also, to some, a symbol of German resiliency in the face of adverse weather.

  For me, the beauty of these beach chairs is that the “hood” blocks the wind. So if you orient yourself toward the sun, you could actually feel quite warm even when it may not be the perfect beach weather. They extend the season, which is paramount in cooler climates.

  I guess that’s why they have stuck around since the 1880′s. If you check out some of the (Google) photo spheres in beach towns in northern Germany, you will definitely find many a strandkorb.

  2017.10.31

• A cohousing case study

  There’s a lot of interest right now in micro apartments. Here is a recent example from New York City. Generally speaking the model is driven by a need to increase housing affordability: shrink the apartments; lower the prices. 

  To compensate for these smaller units, the buildings are often equipped with larger shared spaces and a desire to create a sense of community.

  The below TED talk by architect Grace Kim is an interesting case study of a project that started, first, with a desire for cohabitation. Her thesis is that cohousing can make us happier, less lonely, and more socially connected.

  The cohousing community that she profiles is one that she both designed and developed and one that she now lives in and practices architecture out of.

  If you can’t see the video below, click here. It’s only 10 minutes. After you’ve watched it, let us know in the comment section below if this is a community you could see yourself being a part of.

  https://embed.ted.com/talks/grace_kim_how_cohousing_can_make_us_happier_and_live_longer

  2017.10.31

• 738,000 single-family homes were built last year in the US

  The New York Times recently published “a portrait of new single-family homes” in the US in 2016. Here’s that portrait:

  

  For those of those living in dense urban centers, this portrait is perhaps a reminder that in many other places a large single-family home can be had for about the price of a studio apartment.

  Nothing in the above portrait likely surprised you, but it’s interesting to note that over half of all new single family homes delivered last year were in “The South.” Only 7% were built in the dense northeast.

  The New York Times also recently looked at “international rents per square foot” using data from RentCafe. Here they are:

  

  New York City sits at the top with an average rent of $4.98 psf. This is across all boroughs. I am surprised by how low some of these international rents are. But averages rarely tell you the whole story.

  In any event, I do think that these two graphics start to speak to the economic spikiness that we are seeing across the US. 

  2017.10.29

• Geography is no longer destiny

  

  The Q3 2017 Moneytree Report from PwC and CB Insights was recently released. It tracks venture capital trends in the US and globally. 

  Last quarter, US venture capital-backed companies saw $19 billion in total funding across 1,207 deals. Perhaps most notably for the US, funding in the NY metro area rose 57% to $4.227 billion and inched out the San Francisco Bay Area ($4.177 billion).

  But this was really because of two epic rounds to WeWork (NYC HQ) totalling around $2.5 billion. Also, Silicon Valley ($2.2 billion) is tracked separately to the San Francisco Bay Area in the report.

  Still, there’s a real sense that the New York tech ecosystem is on the rise and that it is probably furthest ahead in the US in terms of being able to catch up to California.

  Last week, MongoDB (NASDAQ: MDB) went public. Albert Wenger, who is an investor in the company, argued on his blog that this is an important milestone for technology companies based in New York. 

  It’s the first core technology company (instead of applied technology company) to go public in the city and it’s a big step forward in terms of demonstrating that “geography is no longer destiny.” 

  You don’t have to move to the Bay Area to win in tech.

  2017.10.28

• Toronto’s first Airbnb-friendly condo building

  This week it was announced that the very first condo building in Toronto (and in Canada) has just signed on to Airbnb’s Friendly Buildings Program. The agreement will take effect on November 1, 2017.

  As the name suggests, the program is about bringing greater legitimacy and structure to short-term Airbnb rentals. Here are two key measures from this particular agreement:

  – Building security will now have full transparency with respect to who is hosting and who their guests are at any given time

  – Airbnb will share 5% of the building’s revenue with the condominium corporation (hosts will also need to pay $50/month to cover any additional maintenance costs)

  What’s compelling about the above is that there’s now a bit of a financial incentive for buildings/boards to support Airbnb rentals. 

  At the same time, if something happens, it’ll now be a lot easier to figure out who was responsible and then chargeback any relevant costs. Right now it’s all happening under the radar.

  My view on Airbnb is the same as the one I took (publicly on this blog) on Uber: It’s not going away. Many people clearly want it. An entire building just accepted it. So let’s figure out how to make it work better.

  One regulation that Toronto is currently exploring and that I think will materialize in some form is a limit on short-term rentals when the unit is not your principal residence.

  This is the difference between Airbnb’ing your place when you leave on vacation (or when you have an extra room) and buying a condo strictly as a short-term rental investment.

  It’s interesting to see the evolution of companies like Uber and Airbnb. Both would never have been successful if they started out by first asking for permission. 

  But now they are mature enough that they are being forced to play nice.

  2017.10.28

• Locals hate you

  BlogTO recently reported that “snarky anti-condo signs” have been popping up around Toronto. Here is one of them via Instagram. It reads (in all caps): Dear Condo Dwellers: Locals Hate You Go Fuck Yourself. 

  I find these posters curious, though it is obvious that they are a reaction to growth, intensification, and general change in this city.

  For one, it implies that condo dwellers and locals are mutually exclusive. In other words, “locals” don’t live in condos. Presumably the implication is that they live in low-rise grade-related single-family housing. Or maybe they live in rental housing? Is it a tenure thing?

  According to the latest 2016 Census data, just over 26% of private dwellings in Toronto are condominiums. And about 30% of people live in a building that has 5 or more storeys. If you include “apartments” less than 5 storeys, this latter number jumps to 40%. So many potential non-locals.

  However, it could be that these posters are primarily directed toward new condos and new condo dwellers. This poster seems to have been plastered in front of this recently completed condo building on College Street.

  If that is the case, then I wonder if there is a temporal cut-off for the hate. For example, the condo building that houses (at its base) my regular grocery store was completed in 1983. 

  The units are large and the demographic seems to skew a bit older. Are these condo dwellers – some of which may have been there for over 3 decades – to be hated? Are they non-locals? Or does urban myopia set in after awhile and they become locals?

  At the same time, it wouldn’t be unusual for the residents of an older condo building to oppose a new proposed condo building. So perhaps “local” isn’t about building typology and it’s more about who came first. That’s certainly a tricky one. Better end here.

  A curious poster that could use a bit more specificity. What do you make of it?

  2017.10.25

• Singapore just capped vehicle growth at 0%

  When I was in New York a few weeks ago, my friend (a New Yorker) said to me that he couldn’t imagine owning a car (he used to but got rid of it with zero remorse). He then elaborated on all of the nuisances that driving in the city produces.

  There are parts of Toronto where you can feel similarly. I feel fortunate to live in one of those parts. Of course, there are other parts of this city where the exact opposite is true. It’s inconvenient not to have a car. These are typically areas where lower land costs have been exchanged for higher transportation costs.

  The City of Toronto has a land area of approximately 630 square kilometers. If that’s all the land we had (the metro area is almost 6,000 square kilometers), you can bet we would think about land use and transportation a bit differently.

  Take for instance, Singapore, a city-state with an area of approximately 719 square kilometers. The Land Transport Authority estimates that 12% of the republic’s total land area is taken up by roads.

  Because of this, they just announced that they have lowered their vehicle growth rate (for cars and motorcycles) from 0.25% per annum to 0% effective February 2018. They can do this through their Certificate of Entitlement (COE) quota. And it won’t be revisited until 2020.

  Put differently: No more cars and motorcycles until, maybe, 2020.

  2017.10.25

• Moving up the stack

  The new GoPro HERO6 is a miraculous little camera.

  It now films in 4k at 60 frames per second. It has great image stabilization. And the screen on the back is new for me and a real game changer. The creative possibilities are endless.

  But probably more importantly you can tell that GoPro is investing heavily in their software. They have to make it easier for people to share the content they create.

  They also know that their survival likely depends on some sort of software layer.

  At its peak, GoPro was trading at $86 per share. Right now, as I write this post, it’s $9.40. Some think the company will be sold within the next year.

  Here is a recent quote from Benedict Evans:

  As we saw with first GoPro and now perhaps Sonos, if you’re riding the smartphone supply chain cornucopia but can’t construct a story further up the stack, around cloud, software, ecosystem or network effects, you’re just another commodity widget maker.

  To borrow Marc Andreessen’s line: Software is eating the world.

  2017.10.24

• Winner take all, or most, economy

  The world is increasingly spiky. Inequality is growing and it is increasingly geographic in nature. We know that people tend to make more money in urban areas compared to rural areas – even when they possess the exact same level of education. The returns to being smart and educated are simply greater in cities.

  But they also depend on the size of the city. Mark Muro and Jacob Whiton of Brookings recently published data looking at labor market performance – by metro size – from 2009-2015 (right after the financial crisis). What they found is that larger metropolitan areas simply performed better than smaller ones.

  

  In summary:

  City size matters because it’s a major influence on city prosperity and adaptability as well as local worker fortunes. Bigger cities are more productive. They are more innovative. They draw better-educated workers by offering higher wages.

  The situation is even more pronounced across the pond. According to the New York Times (quote from Richard Florida), a third of Britain’s gross domestic product comes from London alone.

  What is far less clear is what should be done to address the decline of some of the smaller cities in America – cities that are stagnating and feeling left behind. But perhaps the first step is acknowledging what has happened and what remains feasible in today’s global economy.

  Here is another quote from the above NY Times article:

  Mr. Trump’s promise to relieve the pain by reviving the coal and steel industries, by keeping immigrants out of the country and by raising barriers against manufactured imports is only a rhetorical balm to satisfy an angry base seeking to reclaim a prosperous past that is no longer available.

  That rhetorical balm.

  2017.10.22

• How to make money with low-risk licensing deals

  

  This morning the Toronto Star published a detailed autopsy of the failed Trump International Hotel and Tower Toronto. It outlines the players, the investors, and what supposedly went wrong. Of course, the headline is all about how Trump managed to make money from the deal – through his well-publicized licensing business – even though the project went bankrupt.

  At the beginning of this year, the Washington Post reported that Trump’s name had been licensed and linked to over 50 properties and that these contracts have earned him at least USD$59 million in revenue. Outside of the US and Canada, the Trump Organization has (or had) deals in Brazil, Turkey, Azerbaijan, India, Indonesia, the UAE, and so on.

  There would have been more money to be made in the actual development of these properties, but the beauty of these licensing deals – for Trump – is that they are “low-effort, low-risk, high-reward.” In fact, this past summer it was reported that the breakup fee at Trump Toronto – the fee to exit all contracts with the Trump Organization – was at least $6 million (guessing that’s in USD).

  This story is not unique to Toronto. And so I have got to believe that there’s major brand dilution happening here. Does the Trump name really bring credibility to projects in some markets? How sustainable is this licensing business? 

  The only other thing that I would add to the Toronto Star article is that the hybrid condo-hotel model has proven to be difficult in this city. It’s perfectly fine to have residential condos and a hotel in one tower. There are lots of successful examples of those. But when the condo units can be put into a hotel pool (and there’s an IRR expectation on the part of individual owners), many seem to have been disappointed.

  Part of the challenge with this model here in Toronto is that the condo-hotel units typically end up with a commercial property tax rate, which, in this city, is much higher than the residential rate. This can suppress values.

  Photo by NeONBRAND on Unsplash

  2017.10.21