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 2025

  • The margins were too thin

    June 10, 2025 · View original

    After seeing this beautiful 6-storey and 21-unit social housing project in Lyon, I decided to retweet it and share the fact that we recently had a site under contract in Toronto with the intention of doing a very similar build. We wouldn’t have been able to do the same outdoor spaces at the corner, but it was going to be 6 storeys and without any setbacks. The overall dimensions appear to be similar.

    However, in the end, we had to drop the site because the margins were simply too thin. I was disappointed. Of course, some people responded to my quote retweet by calling this an example of developer greed. But once again, I don’t think most people understand how development economics work. If the margins are too thin it, among other things, means:

    – It’s going to be hard/impossible to raise capital and finance the project – You might be better off buying a “risk-free” government bond instead – That unexpected situations could sink the project (i.e. you lose money)

    To give a specific example, let’s assume that your expected base case rent at the time of occupancy is $4.75 psf. This would mean that if your average suite size is around 600 sf (which ours was), you would need a face rent of about $2,850 per month.

    But what happens if you’re off by only $0.25 and your face rent for this same 600 sf apartment is now $2,700 per month at initial lease up? $150 per month may not seem like a big deal, but it is. If you capitalize this income at something like a 4% rate, you will find that it becomes material.

    This is what I mean by “the margins are too thin.” And it’s similar to any other professional not wanting to take on a job because they might lose money or because it’s “not worth their time.” It’s about managing risk and understanding the opportunity cost of taking on such a project.

  • Factory of culture on São Miguel

    June 9, 2025 · View original

    Yesterday we visited the Arquipélago — Centro de Artes Contemporâneas in Ribeira Grande on the northern part of the island. Originally the Ribeira Grande Distillation Factory, the site dates back to the late 19th century. Construction on the original buildings began in 1893 and the first export of alcohol was reported in 1896. However, production was short lived.

    In 1901, due to pressures from the Portuguese mainland, a protectionist measure was put in place capping alcohol production across the Azorean islands to 2 million liters per year — a drop from 10 million liters per year. The mainland simply couldn’t compete with low-cost alcohol from the islands and so they complained. This crippled the local industry and the factory shut down shortly after.

    Subsequent to this, the site was repurposed for tobacco drying and storage, and even served as military barracks for a period of time. Then in 2006, the property was purchased by the Azorean government and, using money from the EU’s Regional Development Fund, it was remade into what is now fittingly referred to as a “factory of culture.”

    The architects for the project were João Mendes Ribeiro and Menos é Mais Arquitectos, and if you ever find yourself on São Miguel, I would highly recommend you visit the center. The architects did a wonderful job creating a cohesive dialogue between the old (constructed out of black volcanic basalt) and the new. It was recommended to me and now I’m recommending it to all of you.

  • São Miguel’s abandoned five-star hotel

    June 8, 2025 · View original

    The Monte Palace Hotel on São Miguel Island opened in 1989.

    Perched up 500 or so meters above sea level, the hotel offered panoramic views of Lagoa das Sete Cidades. It had 88 rooms, two restaurants, a bar/nightclub, and a total construction area of approximately 13,104 m². Notably, it was the first luxury five-star hotel in the Azores. And in 1990 it was even awarded “Hotel of the Year” in Portugal.

    Then, the place closed — just 18 months after its opening.

    Today, it looks like this:

    Supposedly the hotel failed for a number reasons. It was hard to get to. It lacked on-site amenities. It didn’t, for example, have a pool. And the unpredictable (and often foggy) weather of the Azores made it so that a lot of the time you couldn’t even see the main attraction, which was the view. The sponsors may have also overshot the market at the time.

    In 2017, the abandoned property was finally listed for sale at €1.5 million. Level Constellation ended up buying it for an undisclosed amount at the end of the year. They are a Lisbon-based developer founded by Chinese entrepreneurs. The plan was/is to reopen another 5-star hotel, but that hasn’t happened yet. Though there’s certainly no lack of visitors to the property today!

    I don’t know how you address the weather thing, but nowadays there are many other 5-star hotels on the archipelago. Regardless, my bet is that the existing structure will end up being demolished. I mean, it’s been abandoned and unmaintained for about 35 years.

  • The utility meter vitrines of São Miguel

    June 7, 2025 · View original

    One of the small things that I’ve noticed about the island of São Miguel is that most properties have their utility meters (for things like electricity and water) in small vitrines next to the street. Here are a few examples that I came across:

    Utility meters aren’t the sexiest of things. So if you have to have them on the street for quick readings, having them tidily installed in niches behind glass is, I guess, a better look. It also offers security.

    But apparently the other reason this is done is to protect them from the weather. The Azores have a mild maritime climate characterized by high humidity and frequent rain. This, combined with the salt air, could corrode the equipment.

    And so they lock them up in vitrines.

  • Visiting the motherland

    June 6, 2025 · View original

    Bianca’s maternal lineage is Portuguese — specifically the Azores.

    Sinfully though, she had never been. But that is changing right now. We’re all here, and I was fortunate enough to get an invitation. Thank you! One thing I didn’t appreciate until recently is that a large majority of the Portuguese in Toronto (70%?) are of Azorean descent, particularly from the island of São Miguel (which is the largest and where we are right now).

    This is the result of a major wave of immigration that occurred between the 1950s and 1970s, where Azoreans came for economic opportunity and to fulfill a labor shortage in Canada. This strong connection between Canada and the Azores can be found all around the island. In fact, the first restaurant we walked into had this plate prominently displayed on the wall:

    As soon as I saw it I said to the owner, “I like your license plate!” And she replied with, “thank you, yes, Toronto!”

    I’ve also been spotting Canadian flags all around the island, including this hybrid Portuguese-Canadian one:

    São Miguel is a beautiful place with stunning landscapes, warm and welcoming people, and incredible food. (If you’ve had lapas grelhadas before you’ll know that it’s an optimal delivery mechanism for butter and garlic.) I’m excited to share my photos with all of you, both here on the blog and on Globizen’s Instagram page. Unfortunately, I forgot to bring the card reader for my Fujifilm, and so my best photos will have to wait until I’m back in Toronto.

    Stay tuned.

  • AI is going to change our physical world

    The Waymo Driver is in control at all times

    June 5, 2025 · View original

    Bond — which is a San Francisco-based VC firm with a cool website — just published this 340-page report on Artificial Intelligence. One of the authors of the report is Mary Meeker. She has been called the “Queen of the Internet” thanks to a 20-year run of presentations about the state of the internet, and her perceived ability to identity new trends early. So people are paying attention to this report. Her last one was in 2019 and I mentioned her 2018 report on this blog, here.

    At this point, it’s boring to say that AI is ushering in “unprecedented” global change. Everyone sends around snippets from ChatGPT. I incorporate some sort of AI-powered tool all the time in my daily workflow. And we’ve started using it on our development projects to help with tedious things like design coordination. Eventually we’ll probably stop calling it out as “AI” and just refer to it as the things that computers and the internet can do.

    But I think it’s valuable to point out that this has been a really long time coming. The report talks about an “AI winter” from 1967 to 1996. That’s a long time to stay motivated and interested in something that doesn’t seem to be gaining traction. And it’s a reminder that crypto is still early. Even though I also use blockchains every day and I’ve already transitioned (or am transitioning) a lot of my online life, including this blog.

    Of particular relevance to this community is probably the fact that AI is also going to have a meaningful impact on our built environment. One of the sections in the report is called “Physical World AI,” and it talks about how quickly data centers are now being built (compared to housing) and how Waymo (using AI) has taken something like 27% of the ride share market in San Francisco in the span of just 20 months.

    This transportation product is now scaling, and cities have always responded and remade themselves according to new mobility innovations. This time won’t be any different.

    Cover photo by Annie Spratt on Unsplash

  • Height in the back

    June 4, 2025 · View original

    I came across this tweet the other night showing Toronto’s Yonge Street.

    > Tweet: ️ Tall buildings now line up along Yonge Street in behind the low-rise commercial storefronts that have lined the street for decades. In this image looking northwest across Yonge at the corner with Wellesley Street by UrbanToronto Forum contributor Lachlan Holmes, the new https://t.co/DU0INUNrZs

    In the foreground are small, two-storey main street—type buildings. And behind them are tall buildings. This is very Toronto. What you’re seeing here is a condition that occurs all around the city. Though in many ways, it feels counterintuitive. I mean, shouldn’t the tallest buildings be right on the main street?

    In my opinion, this condition is happening for at least two reasons.

    The first is that Toronto’s historic main streets tend to have a fine-grained lot fabric, which means they’re more challenging to assemble for larger developments. Assemblies are a complex art, and they get exponentially more difficult the more property owners and feuding siblings you add into the mix. So the path of least resistant is larger and chunkier sites.

    The second reason has to do with context. We tend to want to preserve the feel of our historic main streets. One Delisle is an example of this. The podium of the tower is scaled to exactly match what was there before — an Art Deco-style facade from the 20s that will return to the site.

    However, we didn’t have this same constraint on its other elevation (Delisle Avenue) and so we fought not to have your typical podium + setback tower. Instead, we wanted a street level experience that had more presence and urban grandeur.

    This, to me, is an important distinction to consider. Are we setting height back because of history and context? Both of which are important. Or are we setting it back because we’re pretending to still be a provincial Anglo-Protestant town? Sometimes it seems like it’s because of the latter.

    Cover photo by Yi Wei on Unsplash

  • Poles and overhead wires are ugly

    June 3, 2025 · View original

    > Tweet: Dufferin now, without hydro poles and then with trees. https://t.co/BUZFBOm32v

    If you’re familiar with Toronto, you’ll know that one ubiquitous feature of its urban landscape is street poles and overhead wires. They’re everywhere. And even if you aren’t acutely aware of their presence, they’re probably impacting your experience in some way. It’s one of the reasons why some streets just feel nicer than others.

    As an example, here are two AI-generated images that show what the same street in Toronto might look like if you (1) removed the street poles/overhead wires, (2) added some trees, and (3) expanded the boulevard on one side. The AI images do look like AI — and that helps them appear broadly cleaner/nicer — but even still, the streetscape impact is dramatic.

    As Toronto expands its Avenue network and works to rethink its Major Streets, we should also be thinking about bringing beauty and grandeur to our most important arteries. As it stands right now, many of our urban streets do not reflect the kind of global city that we have become.

    Cover photo by Dmitry Gerasimenko on Unsplash

  • I biked for brain health

    June 2, 2025 · View original

    Yesterday was the Mattamy Homes Bike for Brain Health event here in Toronto.

    I’d really like to thank everyone who donated to my ride. I raised $3,800. And the broader Multiplex Construction team raised over $14k. 100% of these donations will go directly to the Baycrest Foundation to fund work related to dementia, Alzheimer’s, and other brain function related illnesses.

    As advertised, I rode 75 km, which is an improvement from the last time I did a charity cycling event like this. My friend Akbar Ahmad reminded me that not only did I do 50 km on a single-speed bike and get a flat tire along the way, but I did it in boat shoes. Hmm. This time around, I dressed more appropriately. It was also 7 degrees when I left home at 630AM and so I bundled up.

    A big kudos to my riding partner, Len Abelman of WZMH Architects, who rode downtown from Vaughan, did 75 km like it was no big deal (I drafted behind him), and then rode all the way back home. His total was 150 km for the day and my knee would not have supported such an endeavor.

    Today was also a reminder of just how big the cycling community is in Toronto. Something like 10,000 people participated and it seemed like the majority of riders were fully geared up. It was great to see and it’s always fun riding on the Gardiner Expressway and Don Valley Parkway without any cars.

    At one point I was beside two guys chatting about how one of them is soon to become a father. The other guy asked if it was a boy or a girl and his response was, “it’s a girl — and I really hope she likes cycling as much as her dad does.”

    Toronto is a cycling city.

  • Jony Ive’s city building efforts in Jackson Square are the way to do it

    June 1, 2025 · View original

    You’ve probably heard:

    > Sam Altman, OpenAI’s chief executive, said the company was paying $6.5 billion to buy IO, a one-year-old start-up created by Jony Ive, a former top Apple executive who designed the iPhone. The all-stock deal, which effectively unites Silicon Valley royalty, is intended to usher in what the two men call “a new family of products” for the age of artificial general intelligence, or A.G.I., which is shorthand for a future technology that achieves human-level intelligence.

    $6.5 billion is a damn good valuation for a one-year-old startup, which says something about the current AI cycle. But what you may be less familiar with are Jony Ive’s efforts to revitalize Jackson Square in downtown San Francisco. In a recent interview with Monocle, published in their June 2025 issue, it was reported that his company LoveFrom (check out their website, it’s fun) has spent nearly $100 million on buildings in the area, equating to at least half a city block.

    Jackson Square is one of the oldest areas of San Francisco. It dates back to the 1849 gold rush and is currently on the National Register of Historic Places. Ive also has a soft spot for the area. Apparently it was where he first landed in the US in 1989, after receiving a bursary following his graduation from Newcastle Polytechnic (now Northumbria University). So this is allegedly not about money:

    > “There’s no fiscal benefit for us in investing in these buildings; these aren’t a means to an end, if that end is generating revenue,” says Ive.

    From a real estate perspective, I don’t think this first part is true. There likely will be a fiscal benefit. As of the first quarter of 2025, downtown San Francisco’s office vacancy rate was hovering somewhere above 30%. The pandemic infamously hollowed out the city and led to a bunch of negative externalities. But the city has always been a place of extreme boom and busts, and a place of disruption. It will reinvent itself.

    So whether or not he cares about fiscal benefit, I think Ive has been accumulating property at exactly the right time — when almost everyone else is pessimistic on the city. At the same time, he’s going above and beyond what a typical landlord would do. For instance, LoveFrom, quite famously, provided a pro bono rebrand for a much-loved and 50-year-old bookstore in the area, William Stout Architectural Books. The design agency allocates time for side projects just “for the love of doing it.”

    This is a form of city building that seems far less common in Canada. I’m talking about the scenario where a singular rich person decides that they really love a place and want to revitalize it. The other example that I have in my mind is Dan Gilbert and downtown Detroit. As of 2024, his firm Bedrock was reported to own 131 properties and approximately 18 million square feet of space, making him the largest and most prominent landlord in downtown.

    I would also argue that this is the most effective way to do it. Because who is going to give more shits: the person running a fund with a 5-7 year time horizon and an IRR clock, or the intrinsically motivated person with a deep personal attachment to a place who wants nothing more than to see it thrive and succeed? My bet is on the latter. It also doesn’t hurt when you strike an all-stock deal with OpenAI for $6.5 billion.

    Cover photo by Frames For Your Heart on Unsplash