In this part of the world, the people who take on the risk of building and who orchestrate the creation of new buildings are typically called real estate developers. That's what I call myself. But they can go by different names depending on where you are in the world and who you are asking.
For example, when a developer is raising money for a project, another term you will often hear is "sponsor." This emphasizes their role as the financial steward of the capital they are raising, as opposed to their operational expertise as a developer/builder. But in practice, they refer to the same thing. The audience has just changed.
In French, real estate developers are typically called something else: promoteurs immobiliers. This literally translates into "real estate promoter," and it speaks to one of the primary functions of developers, which is to initiate, sell, and generally push a project forward. So this is maybe a more accurate term.
The things being developed and promoted can also take on different names. I use the word "project" to describe a new building. Seth Godin has written a lot about this term, and he differentiates it from tasks: "Important work is project work." Meaning, it contributes to something bigger. So I like to use this term for almost everything I work on.
But in British English, it is common for property developers to use something else: "scheme." You'll hear things like, "our scheme contains 250 apartment homes with retail at grade." This word has always stood out to me as odd because I see it as having negative connotations. When someone is scheming, they're up to no good. Or maybe it's just because I'm not British.
Whatever your view, if we combine the French and the British terminology, we arrive at someone who promotes schemes for a living. Hmm. I'll likely stick to "developing projects," but I think the semantics are interesting. Like it or not, it says something about how development functions as an industry, and the skills necessary to participate in it.
Cover photo by aboodi vesakaran on Unsplash
The vast majority of new purpose-built rental housing in Canada relies on CMHC-insured loans to make them financially feasible. In 2024, CMHC estimated that their construction financing programs backed an estimated 88% of new rental starts across the country.
But anyone in the industry will tell you that the terms in which these loans are made available to developers are constantly changing. And I think it's pretty clear that many of the changes being made are intended to push, maybe force, developers into building some percentage of affordable homes as part of their projects.
At the political narrative level, this makes sense: Canada needs more affordable housing. But it's important to remember that homes pegged to below-market rents are not financially feasible to build on their own. So, unless equivalent subsidies are being somehow provided, the remaining market-rate homes will be forced to shoulder the additional costs.
We talk about this a lot on the blog (see inclusionary zoning posts), and I don't see it as an equitable solution. But there's also the problem of it further choking off new housing supply. And my sense is that that's exactly what is happening. It's only getting harder to underwrite new rental housing — certainly in cities like Toronto.
This will have the opposite effect on overall affordability. It also increases the probability that my supply predictions will prove roughly correct. I can't see a world where new rental supply is able to step up and fill the gap being left by new condominiums, a large portion of which was serving as new rental housing.
Toronto is on a path toward a severe housing shortage, and it's very hard for the private sector to do much about it in the current market environment. When that will change remains to be seen.
Cover photo by Darren Richardson on Unsplash
The Financial Times published an article (paywall) over the weekend about the Nobu Hospitality Group.
It stated that they have some 50 restaurants, 40 hotels, and 20 residential projects (i.e. branded residences) either open or in development around the world. One of the first of these branded residences was here in Toronto. And as of July 2024, which was a major liquidity event for the company, it was valued at US$1.3 billion.
According to group CEO Trevor Horwell, their approach always starts with a restaurant: "It's an upside-down business model where the restaurant is the social engine. If we believe a Nobu restaurant can become a genuine social hub for locals, then the hotel and residences can follow."
I like this business model because as we talked about a year ago on the blog, "everything is branded." Knight Frank out of the UK estimates that the number of branded residences around the world is going to go from 611 this year to around 1,020 by 2030. So it seems destined to become a bigger part of our business.
But the other reason I'm drawn to it is because it's a good business to be in. If you own a brand that has value, you can do licensing deals all around the world — which is what Nobu is doing — and not take on the same equity risk that developers typically take on. It's capital-light.
However, the trade-off risk is that you're dependent on the continued attractiveness of your brand. If Robert De Niro ceases to remain involved and/or Nobu just loses some of its cachet over time, then the business won't do as well. But that's true of any hospitality-type business, or any brand for that matter.