A closed-end real estate fund is an investment vehicle with a finite life (call it anywhere from 5 to 12 years, plus extension options). These types of funds have a specific timeframe for raising capital, investing, harvesting the investments they have made, and then distributing proceeds to investors. This is in contrast to an open-ended fund, also known as an "evergreen" fund, which has an infinite life and can accept investments throughout its lifespan.
As a result of these differences, closed-end funds are often used for opportunistic or value-add opportunities where the defined strategy is to buy, fix/develop, and then sell, whereas open-ended funds are often used for core opportunities, where the assets are intended to be held indefinitely for income. Neither fund structure is inherently good or bad; each has its benefits and drawbacks.
However, the perceived weighting of these benefits and drawbacks shifts during market cycles. Since global real estate markets started to turn downward in 2022, the ability to be patient and think long-term has become a key ingredient for survival. You may have done everything you said you would do perfectly, but the market may not be there to grant you the liquidity you had originally planned for.
Now the question becomes: How patient can and should we be?
In my opinion, the greatest opportunities exist for (1) the larger firms that have a strong balance sheet and defensible income-producing properties and (2) the smaller, nimble firms that can capitalize on the dislocation in the market (and aren't overly burdened with legacy assets that are sucking up resources and capacity).
This perspective is true of other sectors as well. This weekend, venture capitalist Chris Dixon of a16z wrote a post titled, "The long game for crypto." In it, he alludes to the current market downturn (ETH is down nearly 60% from its all-time high) and says that "we play the long game at a16z and a16z crypto: Our funds are structured with 10+ year horizons because building new industries takes time."
The fact that he wrote this post says a lot, I think, about the psyche of investors today. The perceived weighting has changed, and people are now investing and building more for the future. As the late Charlie Munger once said, "The big money is not in the buying and the selling, but in the waiting."
Cover photo by KAi'S PHOTOGRAPHY on Unsplash
Happy new year, everyone! Yesterday we spoke about what actually happened in 2024 (and evaluated my predictions from exactly a year ago). Today, let's prognosticate about what might happen in 2025 (keeping in mind that I'm based in Toronto and so there will naturally be a bias toward this market):
Very broadly speaking, our current commercial real estate downturn started, in my opinion, around the middle of 2022. That's when sentiment started to feel different and the market was starting to respond to increasing interest rates. Over the past few years, I've been overly optimistic in terms of how soon the market would reset. But eventually I'll be right. So I'm going to call 2025 as an important turning point where we see more capitulation, more bankruptcies, and a shedding of legacy assets/deals. For the other side of the market, this will mean more new deals.
This, however, does not mean that we will see a development environment that anywhere resembles what we saw prior to 2022. On the new construction residential side (condominium and multi-family rental specifically), I think it's going to take 2-3 years for us to work through and absorb our current supply pipeline. This will be an obvious headwind for land prices. The successful projects in this environment will be located in core/prime locations, underwritten at more modest scales, and focused largely on end users.
In 2024, we saw the continued rise of more people going back to the office. Here in Toronto, the average weekday figure is approximately 73% of what it was pre-COVID (data from November 2024). This year, I think we'll see this figure get close to 90% and then likely start to level off, some five years after the first lockdowns. I think it makes sense that we'll stabilize at some number
I am halfway through reading Read Write Own and I can confidently say that you want to read this book. If you're already a believer in this "next era of the internet" (like I am) it will make you a true believer. And if you're not a believer, maybe it will make you one. Or not. Either way, I am thoroughly enjoying it.
One chapter that will be particularly interesting to all of you is the one where Dixon makes a comparison between the internet and cities. Cities, he argues, work because of a delicate interplay between public and private interests. And the private side works because, among other things, we have the rule of law and the construct of ownership.
If I own an asset, like a piece of real estate, I'm only going to be confident to invest in it if I know that someone won't take it away from me (or dramatically change the rules on me), which is why if this prerequisite doesn't exist, you typically see a lack of investment.
The same is true on the internet. But currently, the dominant form of networks are centralized corporate networks. In city terms, you can think of these like an amusement park. Once you enter through the gates, you're in their world. You could maybe rent some space, but at the end of the day, the owner makes the rules. And if they don't like what you're doing, they can remove you.
It's a pretty stark contrast when you think of it in these terms, which is why it's hard not to feel compelled when you consider that similar dynamics are playing out on the internet right now. Cities thrive because we have rules, ownership, and the freedom to innovate on top of the foundations laid by government.
So I'm all for making the internet more like our most successful cities.
A closed-end real estate fund is an investment vehicle with a finite life (call it anywhere from 5 to 12 years, plus extension options). These types of funds have a specific timeframe for raising capital, investing, harvesting the investments they have made, and then distributing proceeds to investors. This is in contrast to an open-ended fund, also known as an "evergreen" fund, which has an infinite life and can accept investments throughout its lifespan.
As a result of these differences, closed-end funds are often used for opportunistic or value-add opportunities where the defined strategy is to buy, fix/develop, and then sell, whereas open-ended funds are often used for core opportunities, where the assets are intended to be held indefinitely for income. Neither fund structure is inherently good or bad; each has its benefits and drawbacks.
However, the perceived weighting of these benefits and drawbacks shifts during market cycles. Since global real estate markets started to turn downward in 2022, the ability to be patient and think long-term has become a key ingredient for survival. You may have done everything you said you would do perfectly, but the market may not be there to grant you the liquidity you had originally planned for.
Now the question becomes: How patient can and should we be?
In my opinion, the greatest opportunities exist for (1) the larger firms that have a strong balance sheet and defensible income-producing properties and (2) the smaller, nimble firms that can capitalize on the dislocation in the market (and aren't overly burdened with legacy assets that are sucking up resources and capacity).
This perspective is true of other sectors as well. This weekend, venture capitalist Chris Dixon of a16z wrote a post titled, "The long game for crypto." In it, he alludes to the current market downturn (ETH is down nearly 60% from its all-time high) and says that "we play the long game at a16z and a16z crypto: Our funds are structured with 10+ year horizons because building new industries takes time."
The fact that he wrote this post says a lot, I think, about the psyche of investors today. The perceived weighting has changed, and people are now investing and building more for the future. As the late Charlie Munger once said, "The big money is not in the buying and the selling, but in the waiting."
Cover photo by KAi'S PHOTOGRAPHY on Unsplash
Happy new year, everyone! Yesterday we spoke about what actually happened in 2024 (and evaluated my predictions from exactly a year ago). Today, let's prognosticate about what might happen in 2025 (keeping in mind that I'm based in Toronto and so there will naturally be a bias toward this market):
Very broadly speaking, our current commercial real estate downturn started, in my opinion, around the middle of 2022. That's when sentiment started to feel different and the market was starting to respond to increasing interest rates. Over the past few years, I've been overly optimistic in terms of how soon the market would reset. But eventually I'll be right. So I'm going to call 2025 as an important turning point where we see more capitulation, more bankruptcies, and a shedding of legacy assets/deals. For the other side of the market, this will mean more new deals.
This, however, does not mean that we will see a development environment that anywhere resembles what we saw prior to 2022. On the new construction residential side (condominium and multi-family rental specifically), I think it's going to take 2-3 years for us to work through and absorb our current supply pipeline. This will be an obvious headwind for land prices. The successful projects in this environment will be located in core/prime locations, underwritten at more modest scales, and focused largely on end users.
In 2024, we saw the continued rise of more people going back to the office. Here in Toronto, the average weekday figure is approximately 73% of what it was pre-COVID (data from November 2024). This year, I think we'll see this figure get close to 90% and then likely start to level off, some five years after the first lockdowns. I think it makes sense that we'll stabilize at some number
I am halfway through reading Read Write Own and I can confidently say that you want to read this book. If you're already a believer in this "next era of the internet" (like I am) it will make you a true believer. And if you're not a believer, maybe it will make you one. Or not. Either way, I am thoroughly enjoying it.
One chapter that will be particularly interesting to all of you is the one where Dixon makes a comparison between the internet and cities. Cities, he argues, work because of a delicate interplay between public and private interests. And the private side works because, among other things, we have the rule of law and the construct of ownership.
If I own an asset, like a piece of real estate, I'm only going to be confident to invest in it if I know that someone won't take it away from me (or dramatically change the rules on me), which is why if this prerequisite doesn't exist, you typically see a lack of investment.
The same is true on the internet. But currently, the dominant form of networks are centralized corporate networks. In city terms, you can think of these like an amusement park. Once you enter through the gates, you're in their world. You could maybe rent some space, but at the end of the day, the owner makes the rules. And if they don't like what you're doing, they can remove you.
It's a pretty stark contrast when you think of it in these terms, which is why it's hard not to feel compelled when you consider that similar dynamics are playing out on the internet right now. Cities thrive because we have rules, ownership, and the freedom to innovate on top of the foundations laid by government.
So I'm all for making the internet more like our most successful cities.
I am reversing my position on autonomous vehicles (relative to last year). I believe we're much further along -- specifically Waymo is -- than most people think right now. Autonomous vehicles are happening and, in 2025, I think we'll see a significant expansion of coverage across the US led by Waymo + Uber. I don't think we'll see anything earth shattering from Tesla in regards to FSD, but who knows, Elon is good at making things happen. The big test will be cities with snow. This will likely take longer.
At the time of writing this post, the price of EU carbon permits is approximately €71.98 per tonne of carbon dioxide. It's all-time high was €105.73 in February of 2023, but some/many believe that it will need to be closer to €150 by 2030 if the world hopes to reach net zero by 2050. So for this reason, I'm going to say that its price rebounds to between €90-100 this year. This is largely a guess, but I'm including it in my predictions (at least partially) because it's quantifiable and easy to score later.
Crypto and technology more broadly are going to have an awesome year in 2025. As Fred Wilson wrote on his blog yesterday, one of the things we saw in 2024 was "Silicon Valley's hostile takeover of the federal government, via an infiltration of Donald Trump's MAGA movement." The "establishment government" was seen as being antagonistic toward tech and innovation, and so the industry jumped teams. One would expect that to pay dividends this year.
More specifically, I think we're going to see a web3 consumer application that finally breaks into the mainstream. Already, I've been impressed by NFT marketplaces like Rodeo. Many people won't appreciate that it's powered by some blockchain, but that's exactly what we want. We want the underlying technology to recede into the background and for the experience/utility to come into the foreground.
And with that, I will end and leave you all with this recent tweet from Chris Dixon. It's worth clicking through and reading the entire thing.
A big thank you to everyone who continues to read this blog. We're now into year 12 of this daily writing practice (my first post was in August 2013), and I'm still feeling more inspired than ever. It truly feels like we're at the dawn of so many new and exciting things: a new real estate cycle, an unprecedented innovation environment, and the list goes on. Next up, I'm going to write specifically about what we at Globizen are focused on for this upcoming year.
Cover photo by Tyler Rooney on Unsplash
I am reversing my position on autonomous vehicles (relative to last year). I believe we're much further along -- specifically Waymo is -- than most people think right now. Autonomous vehicles are happening and, in 2025, I think we'll see a significant expansion of coverage across the US led by Waymo + Uber. I don't think we'll see anything earth shattering from Tesla in regards to FSD, but who knows, Elon is good at making things happen. The big test will be cities with snow. This will likely take longer.
At the time of writing this post, the price of EU carbon permits is approximately €71.98 per tonne of carbon dioxide. It's all-time high was €105.73 in February of 2023, but some/many believe that it will need to be closer to €150 by 2030 if the world hopes to reach net zero by 2050. So for this reason, I'm going to say that its price rebounds to between €90-100 this year. This is largely a guess, but I'm including it in my predictions (at least partially) because it's quantifiable and easy to score later.
Crypto and technology more broadly are going to have an awesome year in 2025. As Fred Wilson wrote on his blog yesterday, one of the things we saw in 2024 was "Silicon Valley's hostile takeover of the federal government, via an infiltration of Donald Trump's MAGA movement." The "establishment government" was seen as being antagonistic toward tech and innovation, and so the industry jumped teams. One would expect that to pay dividends this year.
More specifically, I think we're going to see a web3 consumer application that finally breaks into the mainstream. Already, I've been impressed by NFT marketplaces like Rodeo. Many people won't appreciate that it's powered by some blockchain, but that's exactly what we want. We want the underlying technology to recede into the background and for the experience/utility to come into the foreground.
And with that, I will end and leave you all with this recent tweet from Chris Dixon. It's worth clicking through and reading the entire thing.
A big thank you to everyone who continues to read this blog. We're now into year 12 of this daily writing practice (my first post was in August 2013), and I'm still feeling more inspired than ever. It truly feels like we're at the dawn of so many new and exciting things: a new real estate cycle, an unprecedented innovation environment, and the list goes on. Next up, I'm going to write specifically about what we at Globizen are focused on for this upcoming year.
Cover photo by Tyler Rooney on Unsplash
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
