In Chinese culture, certain numbers — like 4 — are generally considered unlucky because of how they sound. I don't speak Mandarin or Cantonese, but as I understand it, 4 sounds similar to "death." And this is even more the case in Cantonese.
Four sounds exactly like death, fourteen sounds like "definitely die," and forty-four is the equivalent of "die, certainly die." (Please correct me if I'm wrong.) It is for this reason that in certain real estate markets, and in particular Cantonese-speaking markets like Hong Kong, 4-related numbers are often avoided whenever possible.
This can also be the case in other markets. Before we launched sales for One Delisle, the team made the decision to be mindful of this superstition and skip floors 4, 14, and 44. The result is that the homes on floor 4 became suite 501, 502, 503, and so on, and the building itself went from having 44 floors to 47 floors.
We did this so that nobody would be buying on the "die, certainly die" floor, and so from a marketing perspective, I think these strategies can make a lot of sense.
But what I would also say is that, from a development perspective, you should avoid this whenever possible. It adds coordination complexity. What we saw happening early on was that someone would say suite 501, and then you'd have someone else question whether they were talking about the suite on architectural/construction/legal level 5 or the suite on marketing level 5.
To solve this, we had to be extremely draconian about how levels and suite numbers were allowed to be communicated. Firstly, there's no such thing as a "legal" suite number. Suite numbers are purely a marketing thing — a number that goes on a front door. The legal description of a condominium suite involves a legal level and a legal unit.
So what we did was call a meeting and tell everyone the following: Any and all communication regarding suites needs to include the legal level, legal unit, and suite number, and failure to use all three numbers means you will be liable for any mistakes. We then updated the drawings to reflect this nomenclature.
Building buildings requires some assholes.
My first boss used to tell me that development is the closest thing to being in the military. Never having been in the military, I can't say whether this is accurate or not, but it should give you an indication of what it can feel like to build. Sometimes skipping floors is just what you need to do. But if you can avoid it, it's one less thing you need to be an ass about.
Cover photo by Christian Lue on Unsplash
When I was in Miami at the end of last year for the Elevate real estate conference, I was given the impression that every new development project has a luxury brand associated with it and that buyers from all over the world still have an insatiable demand for the city. The Toronto developers in the room had no choice but to commiserate amongst each other and make up excuses for why abundant sunshine and low taxes couldn't possibly be that nice.
But things seem to be changing quickly in Miami. I am seeing reports that the condominium market continues to soften and that unsold inventory is starting to accumulate. This seems to be happening for a bunch of reasons: lots of supply, relatively high interest rates, higher insurance costs (due to climate things), more stringent reserve funding requirements (following the tragic collapse of the Surfside tower), and perhaps even the hostile environment that the US is now creating for foreigners.
I don't have clear data for the pre-construction side of the market (like I do for Toronto), but typically you need a strong resale market to support new development. And that's because pre-construction pricing tends to be higher than resale pricing. If the latter is softening, then the value proposition for something new is weakened. On top of all this, there's right now a risk premium on US assets. The country is being viewed as less safe.
So it's easy to be bearish.
If any of you have any direct insights on the South Florida market, please leave a comment below.
Cover photo by Tomas Lundahl on Unsplash
This is how the meme goes:
At the time of writing this post, Bitcoin is up ~129% YTD. One Bitcoin is now US$101,256.70, which is a big deal in that it's a nice round milestone and it sounds like an impressive number to most people, including me. The result is that more people now want to buy Bitcoin, hence the above image. Now, this may turn out to be a good time to do this, or it may not be, I really have no idea. But as a crypto believer and long-term holder, I'm certainly happy to see this momentum.
At the same time, the current crypto market makes me want to buy less of it. Ethereum, which makes up the majority of my holdings, is also up this year. But I was dollar-cost-averaging more of it over the past few years when it was dropping and sentiment seemed to be against it. That, to me, felt like a better time.
My favorite investing framework is one that I have written about many times before on this blog and one that people far more successful than me like to talk about. It goes something like this: you want to be right about things that most people think are wrong. Said differently, you want to aim for non-consensus bets, and that's because it's pretty hard to find value when everyone else is chasing the same thing. Markets are competitive.
So as a general rule of thumb, if you can find opportunities that you believe wholeheartedly in, but that many people think are dumb, then directionally, you're probably getting warmer. Obviously, you can't believe in something and then be wrong about it. That's not productive. But if you start with something that many/most people are critical of and then work backwards, you might find something interesting.
I am reiterating all of this today because of our current market dynamics: crypto is way up, as you know, but many real estate markets are way down. For example, here in Toronto, few people are buying pre-construction homes, whereas a few years ago, they were lining up and banging down the doors of sales offices. We have moved from consensus to non-consensus.
This is making for a challenging development environment. But at the same time, I think it's a wonderful opportunity for people looking to buy/rent a home and for real estate companies willing to grind it out and be creative. Legacy deals will need to get worked out and competition is only going to lessen as groups leave the market to focus on other things, like buying Bitcoin above $100k.
More specifically, this is what I'm excited about right now as a developer:
It is significantly easier to buy wonderful real estate. There's far less competition, and so the opportunity is there to structure creative deals. This is especially valuable for smaller companies like ours.
You have to know what you're doing to be successful. The market isn't going to bail you out. You need to roll up your sleeves and execute on your strategy.
Creativity and new ideas are now being rewarded. A red hot market only strengthens our bias toward the status quo. Everything is working, so why change? Except now it's not. So what are we going to do?
Market cycles are a healthy phenomenon. And I think we'll start the next cycle in a better place. Housing will be more affordable and projects will be better tailored toward end users, among other changes. But in the interim, there is now this great opportunity to be right about things that most other people think are wrong. And that's because so much feels wrong. But that's okay. Because it's actually the exact precondition you want.
Disclaimer: Nothing in this post should be construed as investment advice. I am long Ethereum and Toronto housing, and I don't plan to change this, but you should do your own homework.
Cover photo by Saad Salim on Unsplash