Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Month: June 2020

  • Integral House sells for $18 million

    One of the most famous and important houses in Toronto, and in North America, just sold. It was reported last week in the Globe and Mail in an article called, “Integral House finds buyer amid wave of high-end Toronto deals.”

    Designed by Shim-Sutcliffe Architects, the 18,000 square foot Integral House was commissioned by mathematician and musician James Stewart. It was completed in 2009 at a cost that seems to vary widely depending on where I look online. But it did just sell for $18 million.

    For photos and drawings of the house, click here. The section is really interesting because of the way in which the house is built into the side of a ravine. The house is 5 storeys, but only 2 of these levels would be visible from the street.

    The article goes on to mention a bunch of other high-end transactions that were consummated during this pandemic, ranging from a $13 million home in Forest Hill to a $9 million condo in Yorkville. These are all positive signs for this pandemic market.

  • Reallocating urban space

    Back in March and April, the belief seemed to be that cities had lost their allure. Density had proven to be a bad thing and we were now all going to live in the country and spend our days working via Zoom. But as our cities begin to slowly reopen, something else seems to be taking place. In fact, the great irony of this pandemic is that it will probably strengthen our cities in the medium and long-term.

    We’re pedestrianizing our streets. (Above is a photo of King William Street in Hamilton that I took last week. London is similarly looking at pedestrianizing parts of Soho.) We’re encouraging restaurants to expand their patio footprints. We’re adding bicycle lanes faster than we ever have before here in Toronto. And we’re finally becoming a little less uptight about the public consumption of alcohol. This is among many other things.

    The reopening of our cities isn’t going to happen overnight. Some, if not all, will probably stumble as we find our way. But as unfortunate as this period of time is for most of us, it is forcing us to reconsider how life is lived in our cities and how we allocate urban space. Some of this will be temporary, but I suspect that a great deal of it will actually stick.

    We’ll then wonder, “why didn’t we do this sooner?”

    Photo: King William Street, Hamilton

  • Three-legged stool

    A good friend of mine, who is also in the industry, once described real estate development as a three-legged stool. In order to develop, you really need three things: expertise, capital, and a site (i.e. land). This probably seems fairly obvious. I mean, you need to know what you’re doing, you need the money to do it, and then you actually need a place to build. But as simple and as obvious as this may seem, there are barriers to entry. Real estate is a capital intensive industry. And despite what the general public seems to believe about the pockets of developers, most are raising outside capital.

    The thing about this three-legged stool is that you don’t necessarily need to have all of the legs at once, and in many cases you won’t. If you have two of them in place, it’s usually feasible to figure out and get the last one. For example, if you know what you’re doing (expertise) and you have a site (owned or “under control”), then presumably you have a development pro forma that makes some economic sense. And with those things, you generally should be able to find the capital that you need to execute on your project.

    I’ve also met people who have managed to build this three-legged stool starting with only one leg. They didn’t have much development experience or capital connections, but they learned enough to figure out how to value development land. They then went out and started knocking on doors, eventually putting together a development assembly. They then took this assembly to developers (people with expertise) and the stool eventually got built. Starting with only one leg just means you’re going to have to work harder to fill in the others.

    A one or two-legged stool won’t stay upright on its own. But hustle will hold it up temporarily while you figure out a creative way to attach the missing leg(s).

    Photo by John Boatile on Unsplash

  • How honest do buildings really need to be?

    What is the right way to do heritage preservation? How should you approach an addition to an existing building? I was reminded of this topic this week, which then reminded me of a post I wrote last summer when this issued flared up in Ottawa because of the “Chateau Laurier battle.” The takeaway from last year’s post was this: “We cannot recreate the past, only parody it.” Indeed, the Province of Ontario maintains that “legibility” is an important principle in the conservation of built heritage properties. People should be able to distinguish the new from the old. Don’t blur the distinction.

    I will also say that in architecture school they instil in you the ideas that buildings should be honest, they should reflect the current milieu, and that materials should be truthful. What this loosely means is that you want to use materials where they are most appropriate and you want to reveal their true nature. Don’t pretend that things are something they are not. i.e. Don’t be fake. At the same time, I very early on learned that most people don’t give a shit about the kind of nuanced and theoretical discussions that happen within architecture schools. They like what they like.

    And there’s a big segment of the market that wants buildings to look as they did a long time ago. They want tradition. They want historic. Or they at least want some sort of “transitional” style that sits somewhere between old and kind of new. They want architects like Robert A.M. Stern and Richard Wengle, both of which are extremely popular and talented. So really, who am I to judge? As most of you will know, I’m a modernist. I am more interested in the future than I am in the past. But I recognize that the past is important and should not be forgotten. How best to do that is up for debate.

  • Views from the Junction

    Shot on DJI Mavic Mini

  • The value of Champagne

    Westmount Gaurantee hosted a Champagne tasting event for its clients this evening. Obviously it took place over Zoom. It was a great event and I learned a few things about Champagne. As most of you will know, sparkling wine cannot be called Champagne unless it’s from Champagne, France — a region that, as of 2008, included about 76,000 acres of vineyards and 319 villages. But as I started thinking about this acreage, the developer in me couldn’t help but wonder: “How was the boundary for the Champagne region established? Is it based on unique soil conditions that can’t be found anywhere else in France and the world, or is this a way to artificially control the supply of Champagne and fix prices?”

    As you might imagine, the answer is complicated. (See the Champagne Riots of 1910-1911.) The viticultural boundaries of Champagne were legally defined in 1927. And the entire area is compromised of five wine-producing districts. But there have been revisions to this boundary. In 2008, the production zone was increased from 319 communes to 357. (I’m sure this was highly controversial.) And since the value of land is dependent on what you can do with it, this would have had a dramatic and overnight impact on land values. Yesterday you couldn’t apply a Champagne label, but today you can. According to this article from 2008, we are talking €5,000 a hectare to €1 million per hectare because of a simple boundary change. That is the value of “Champagne.”

    Photo by Lomig on Unsplash

  • Australia 108

    One of my favorite YouTube channels is the B1M. Apparently it is the most subscribed-to channel focused on construction. If you don’t already subscribe, you can do that over here.

    Below is a recent video about Australia 108 in Melbourne. It’s still under construction, but it is topped out and it is now the tallest building in the country at over 300m. That makes it a “supertall.”

    When you’re building this tall, it can make a lot of sense to segment and occupy portions of the building before construction is fully complete. Among other things, it helps to manage risk. And that’s exactly what they’ve done here.

    The contractor building Australia 108 is Multiplex. They also happen to be our construction management partner on Junction House. Except our project is a bit more boutique than Australia 108.

  • Zoomed out

    Joining a Zoom (or other video) meeting is as frictionless as opening up the calendar invite and clicking the link. No need to login or do much else, except maybe fiddle with the audio for a bit. “Can you hear me now?” The benefits to this are obvious. But if you’re Zoom (or another video conferencing company) there could be a slight problem: I don’t really care where that link is taking me, as long as it’s taking me to the meeting I was supposed to join 4 minutes ago. In other words, there aren’t really any network effects. The service doesn’t get any better for me as more people use it, because anybody can join the link that I send them. Benedict Evans recently made this argument, here, and he goes on to posit that video calls, like voice calls, are destined to become a commodity. All that will matter is how you package them up. Makes sense.

  • Airbnb’s predictive abilities

    I recently discovered and subscribed to Packy McCormick’s “Not Boring” newsletter. So far it’s quite good, and so here I am mentioning it to you all on the blog. In his latest newsletter, he makes the case for why Airbnb and Zillow — the two largest residential real estate tech companies — should merge. Naturally this new company would be called Zillbnb. You can read all about why he thinks this is a good idea over here, but I would like to point out one thing that I found interesting.

    Packy makes the argument that “easiest-to-book, shortest duration reservations” are a leading indicator for changes in demand. In other words, platforms like Airbnb can start to tell you where people might want to live and platforms like Breather can start to tell you where people might want to work.

    To support this argument he uses the example of his Airbnb rental outside of New York City. Sure, demand initially fell off a cliff at the beginning of lockdown, but then it started to surge as New Yorkers sought refuge outside of the city. And while I think that this particular change in demand will likely end up being short-term in nature, a similar trend is being reported around in the world. Did we hear it first on Airbnb?

  • Shoppable AR

    I don’t think Snapchat is on a lot of people’s radars these days. (Though it did recently become worth more than Twitter.) But every time I hear about what they’re building I can’t help but think, “Wow, that’s really cleaver and creative. I see a longer-term vision at work here. And if it all works out, this could be something very special.”

    This past week it was announced that the company is going long on something they call shoppable AR (augmented reality). Already, more than 170 million of its users engage with its AR features on a daily basis. Shoppable AR is an extension of that and will allow people to do things like try on clothes, similar to the way people currently apply selfie filters. Obviously this could be a boon to online shopping.

    They’re also continuing to develop something called “Scan,” which allows people to scan a logo or barcode and trigger a specific AR experience related to a product they may be thinking about buying. It doesn’t take much to think about how some of this functionality could be applied to specific industries, such as real estate.

    But will all of this fuel growth for the company? Or will Facebook simply steal the idea if or when it catches on?