For two reasons, I really like Fred Wilson's recent blog post on hypothetical value to real value. Firstly, it is structured in the way that I think good blog posts are structured. He starts with a personal story (about this son) and then uses that to take a position and impart some knowledge about the venture capital industry. It makes for a more engaging read. Secondly, I like how he describes the journey and spread between hypothetical value and real value:
Venture capitalists and seed funds and angel investors make or lose money on the journey from hypothetical value to real value. And when the spread between the two narrows, the money we make is less. When the spread increases, the money we make is more. It is easier to drink your own Kool Aid in the world of hypothetical values. You handicap the odds of winning more aggressively. You trade ownership for capital at work. You accept the new normal. Real value doesn’t move so fast. Because it is right in front of you. You can see it. So it is not prone to flights of fancy. I try to keep this framework front and center in my brain as we meet with founders and work to find transactions that work for everyone. I find it to be a stabilizing force in an unstable market.
All of this is related to the notion that you make real money when you're right about something that most people think is wrong. Because that would be hypothetical value. If it were real value, then everyone would simply believe it. It would be "right in front of you." And this is pretty much true of all competitive marketplaces, including the real estate industry. Risk and uncertainty create opportunity.
Photo by James Sullivan on Unsplash
121 East 22nd -- which is OMA's first ground-up project in Manhattan -- recently finished up construction at the corner of E 23rd St and Lexington Ave (the site continues through to E 22nd St, where there is basically a 2nd building). I wrote about the project over two years ago, here.
Below is a photo by Laurian Ghinitoiu, via Dezeen, of it completed:
For two reasons, I really like Fred Wilson's recent blog post on hypothetical value to real value. Firstly, it is structured in the way that I think good blog posts are structured. He starts with a personal story (about this son) and then uses that to take a position and impart some knowledge about the venture capital industry. It makes for a more engaging read. Secondly, I like how he describes the journey and spread between hypothetical value and real value:
Venture capitalists and seed funds and angel investors make or lose money on the journey from hypothetical value to real value. And when the spread between the two narrows, the money we make is less. When the spread increases, the money we make is more. It is easier to drink your own Kool Aid in the world of hypothetical values. You handicap the odds of winning more aggressively. You trade ownership for capital at work. You accept the new normal. Real value doesn’t move so fast. Because it is right in front of you. You can see it. So it is not prone to flights of fancy. I try to keep this framework front and center in my brain as we meet with founders and work to find transactions that work for everyone. I find it to be a stabilizing force in an unstable market.
All of this is related to the notion that you make real money when you're right about something that most people think is wrong. Because that would be hypothetical value. If it were real value, then everyone would simply believe it. It would be "right in front of you." And this is pretty much true of all competitive marketplaces, including the real estate industry. Risk and uncertainty create opportunity.
Photo by James Sullivan on Unsplash
121 East 22nd -- which is OMA's first ground-up project in Manhattan -- recently finished up construction at the corner of E 23rd St and Lexington Ave (the site continues through to E 22nd St, where there is basically a 2nd building). I wrote about the project over two years ago, here.
Below is a photo by Laurian Ghinitoiu, via Dezeen, of it completed:
Emily Badger's recent piece on "how 'developer' became such a dirty word" has been getting passed around within the industry over the last few days. I had a chuckle when I read this bit:
The notion that development is inherently bad, or that developers are inherently bad actors, seems to ignore that the communities residents want to protect from developers were once developed, too, and often by people who made money at it. (That is, unless you believe in “immaculate construction.”)
The article hits on a number of points that are absolutely true. There's generally a lack of understanding around the economics behind new housing. And the cost structures, today, are dramatically different compared to the suburban-industrial complex.
To provide one example, our cost consultant, Finnegan Marshall, recently shared with me a chart (dated April 2019) that broke down the various government fees that typically make up every new condo suite in Toronto.
What it showed is that between 20-24% of the price of a new condo is generally compromised of government fees and taxes that span all three levels of government. This includes everything from development charges (impact fees) to parkland dedication.
Similarly, the article quotes one developer from Montgomery County who estimates that the impact fees alone for his projects are usually upwards of $60,000 per housing unit. (This is pretty cheap compared to Toronto.)
I raise this as an example because development charges/impact fees have become an important source of revenue for cities across both Canada and the US. They often offset lower property taxes. (Whether this is appropriate is an entirely other debate.)
And so I find it paradoxical that many homeowners would like to simultaneously see lower property taxes, no new development, and more public services and infrastructure.
The defining feature is its "prismatic corner", which, I understand from this interview with David Von Spreckelsen (President of Toll Brothers City Living), was largely an outcome of the site's restrictive zoning. There was a requirement to have constant street walls. That minimized what could be done architecturally on the project's main elevations.
The solution is two contextual street walls -- the punched windows are designed to match the rhythm of their adjoining buildings -- coming together and creating dramatic visual interest only at the point where they intersect. Below is a rolled out elevation from OMA. Note the gradient created by the windows as they converge toward the corner (center in the drawing below).
The other interesting thing about this project is that it reminded me just how different the built form of Manhattan can be compared to Toronto. In the case of 121 East 22nd, the streetwalls rise 150 feet without any stepbacks. There is then a 10 foot stepback before the building rises another 60 feet -- similarly without any additional breaks.
I love the grandeur.
Emily Badger's recent piece on "how 'developer' became such a dirty word" has been getting passed around within the industry over the last few days. I had a chuckle when I read this bit:
The notion that development is inherently bad, or that developers are inherently bad actors, seems to ignore that the communities residents want to protect from developers were once developed, too, and often by people who made money at it. (That is, unless you believe in “immaculate construction.”)
The article hits on a number of points that are absolutely true. There's generally a lack of understanding around the economics behind new housing. And the cost structures, today, are dramatically different compared to the suburban-industrial complex.
To provide one example, our cost consultant, Finnegan Marshall, recently shared with me a chart (dated April 2019) that broke down the various government fees that typically make up every new condo suite in Toronto.
What it showed is that between 20-24% of the price of a new condo is generally compromised of government fees and taxes that span all three levels of government. This includes everything from development charges (impact fees) to parkland dedication.
Similarly, the article quotes one developer from Montgomery County who estimates that the impact fees alone for his projects are usually upwards of $60,000 per housing unit. (This is pretty cheap compared to Toronto.)
I raise this as an example because development charges/impact fees have become an important source of revenue for cities across both Canada and the US. They often offset lower property taxes. (Whether this is appropriate is an entirely other debate.)
And so I find it paradoxical that many homeowners would like to simultaneously see lower property taxes, no new development, and more public services and infrastructure.
The defining feature is its "prismatic corner", which, I understand from this interview with David Von Spreckelsen (President of Toll Brothers City Living), was largely an outcome of the site's restrictive zoning. There was a requirement to have constant street walls. That minimized what could be done architecturally on the project's main elevations.
The solution is two contextual street walls -- the punched windows are designed to match the rhythm of their adjoining buildings -- coming together and creating dramatic visual interest only at the point where they intersect. Below is a rolled out elevation from OMA. Note the gradient created by the windows as they converge toward the corner (center in the drawing below).
The other interesting thing about this project is that it reminded me just how different the built form of Manhattan can be compared to Toronto. In the case of 121 East 22nd, the streetwalls rise 150 feet without any stepbacks. There is then a 10 foot stepback before the building rises another 60 feet -- similarly without any additional breaks.
I love the grandeur.
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