Camera: Fujifilm X-T3, 23mm, f/2.0
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A new Frame Home in Brooklyn
Fred Wilson (venture capitalist) and Joanne Wilson (also an investor) have been working on a passive house apartment building in Brooklyn for the last five years. Their development company is called Frame Home. And this past week they received a pretty great Christmas gift in the form of a Temporary Certificate of Occupancy from NYC Buildings.
At 5 storeys and with only 10 two-bedroom units, you could classify this building as the kind “missing middle” housing that gets so much air time here in Toronto. And so not only have they managed to build relatively small, but they’ve done it using passive house design principles.
Here are some of the apartment building’s features:
- Cross-laminated timber (CLT) structure
- Passive house design approach
- Triple-pane windows
- Interior polished and insulated concrete walls (presumably to act as a thermal mass to moderate heating/cooling throughout the year)
- Solar panels installed on the upper facade and roof (passive house design should, in theory, allow these to supply a big chunk of the building’s energy needs)
- No fossil fuels used throughout the building — everything is electrical
- Fully sub-metered units
- Outdoor circulation spaces/stairs, providing access to a shared rooftop courtyard (I’m assuming these also serve as required egress for the building)
- Dedicated elevator entrance for every suite (i.e. no interior circulation/corridor spaces)
- Composting facilities within the building
- Bike room connected to the ground-floor lobby
There’s also a co-working and community space planned for the ground floor called “Framework.” Interestingly enough, they have already responded to the current pandemic. Instead of open-air desks, you rent fully enclosed 8′ x 8′ pods that are sound-proofed and come with their own HVAC systems.
Congratulations Fred and Joanne on such an exciting and pioneering project. (I would love to see the development pro forma!) If you’d like to learn more about Frame 283, here is their website and here is a profile that the New York Times did on the project back in January. Building with CLT is apparently prohibited in NYC. Frame 283 got an exemption.
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Merry Christmas everyone
I’m taking the day off from blogging (kind of), but I would be remiss if I didn’t leave you all with something city related. And so here is an article by Bloomberg CityLab talking about how the quality of municipal Christmas trees can serve as a kind of proxy for a city’s current state of affairs. In other words, the inability to execute on a reasonably good Christmas tree is perhaps a signal of other municipal problems.
For those of you who celebrate Christmas, I hope that you’re somewhere with a tree that doesn’t look like a toilet brush or a plucked chicken (these are some of the dubious monikers that have been given to bad Christmas trees around the world). I know that this is not the Christmas we all ideally want. This time of year can be lonely without family and friends. But I think we have every reason to be optimistic about 2021.
I wish you all health and happiness. Merry Christmas everyone.
Photo by Roberto Nickson on Unsplash
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Thinking exponentially and the rule of 72
I came across the above Twitter thread last night before bed and I thought it was great. It’s about the importance of thinking exponentially, as opposed to linearly, when it comes to finance and investing.
In it, the author provides a quick rule of thumb to help reframe our mind when it comes to compounding. It’s called the “rule of 72” and it works like this.
To calculate the approximate number of years to double your money, simply take 72 and divide it by the annualized rate of return (%). For example, if you had an annualized rate of return of 10%, this rule of thumb would tell you that you’re going to need 7.2 years to double your money.
If the annualized rate of return were to increase to 18%, it would now only take you 4 years to double your money. Of course, this rule of thumb is an approximation. It only really works within a certain band of returns.
If the annualized rate of return were 100%, this formula would spit out 0.72 years, whereas an annualized rate of return of 100% actually means that you’re doubling your money in the span of one year.
It’s a rule of thumb. The reality is that compound returns are incredibly powerful over the long-run, not only for finance and investing, but for life in general. Worthwhile things take time. If you’ve got the patience and discipline, the long-run curve ends up looking pretty sweet.
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The bank robbery capital of the world
Between 1985 and 1995, Los Angeles’ retail bank branches were robbed some 17,106 times. In 1992, which was the the city’s worst year for robberies, the number was 2,641. This roughly translated into about one bank robbery every 45 minutes of each banking day. All of this, according to this CrimeReads piece by Peter Houlahan, gave Los Angeles the dubious title of “The Bank Robbery Capital of the World” during this time period.
So what caused this? Well according to Peter it was facilitated by two phenomenons. One is indigenous to Los Angeles and the other was a result of the party scene that started to emerge in the city in the late 1970s during the disco era. Peter argues that this spike in robberies was the result of (1) the city’s sprawling car-oriented urban landscape and (2) its widespread use of cocaine at this time.
The former allowed robbers to quickly flee the scene (many banks were located near highway on-ramps) and the latter is what seemed to motivate people to actually do it. They needed a way to fund their addictions. By the early 1990s, it was estimated that up to 85% of all bank robbers in Los Angeles were suffering from some sort of drug addiction, and the surveillance photos seemed to reinforce this. Repeat offenders were noted as looking progressively worse.
But what’s perhaps most interesting to this blog audience is point number one. To what extend did the built form of the city actually facilitate this kind of behavior? Surely Los Angeles wasn’t the only place that started enjoying disco music, and some other things. And so did bank robberies, in a way, get coupled to the city’s labyrinthian freeway network? Was this the cover that robbers needed to make them feel like they weren’t going to get caught?
For Peter’s full story, click here.
Photo by Dillon Shook on Unsplash
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Thinking differently and what courses to take in school
When I was in grad school studying architecture and real estate, the Zell/Lurie Real Estate Center used to run a regular lunch series with real estate executives. The way it worked is that executives would come in to the school and 15 or so students — all of whom were studying real estate — could sign up to have lunch with them in a boardroom. I can’t remember if the school provided us lunch or we had to bring our own, but either way, you had an hour to hear them talk about the industry and ask them whatever you wanted to know.
One time somebody asked a question about what courses they should take outside of their business and real estate classes. And I’ll never forget what the executive said. His recommendation was to take courses that were as far away from business, finance, and real estate as possible. He said take fine art history classes, learn about ancient civilizations, or whatever. Just take classes that force you to think a little differently than everybody else.
The reason, I think, this resonated with me so much was because I had a certain amount of academic insecurity at that moment in time. I was coming from an architecture and design background and my classmates were former investment bankers and management consultants, all of whom had a far better grasp of “the numbers” than I did. It meant that real estate recruiters didn’t want to talk to me because I was the square peg for their round hole.
But being a square peg really motivated me.
I remember walking into the program director’s office at that time and requesting that I be put into what was considered to be the more difficult real estate finance class offered at Wharton. He said that he didn’t recommend it. Non-MBAs (which I was at the time) can’t typically handle it. And if he put me into it, I would likely come back to him crying about how hard it was. I asked him to put me in it and said that I would come back to show him my “A.” He put me in it and, yes, I got an “A.”
But at the end of the day, the point that this executive was making at the lunch was that the math and mechanics behind things like cap rates, IRRs, and DCFs is not rocket science. Real estate is not rocket science. You of course need to know how this stuff all works, but it is not the be-all and end-all. The other critical parts of this are more art than science. What are the assumptions that I am making as part of my analysis? What do I believe about the future of the world? To answer these questions, you need think critically and laterally. And having a different perspective can help you do exactly that.
This was true back in 2008 and it’s still true today.
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More on Enhancement Zones — a follow-up to density transition zones
Architect Michael Spaziani left a great comment on yesterday’s post about density transition zones and the Enhancement Zone concept that was first proposed as part of the St. Clair West Avenue Study. You can read it by clicking here. Michael was part of the consultant team that worked on this study and so they are the ones that came up with the idea. As we talked about yesterday, Enhancement Zones were ultimately struck from the study. The idea of applying a 60 degree angular plane to certain avenue mid-rise sites also didn’t make it through. This guideline was intended to be used on sites where the impacts to adjacent neighborhoods weren’t as great. For example, a site on the south side of St. Clair Avenue that wouldn’t be producing any shadow impacts on people’s backyards. These concepts and discussions are all over a decade old at this point. But it feels like it’s time to revisit them in a serious way. If you take a look at the Mid-Rise Buildings Performance Standards (available over here), you’ll find some “considerations for enhancement zones.” They’re all crossed out though.
Image: Mid-Rise Building Performance Standards
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The case for density transition zones (and why people will probably hate them)
Toronto is known for its tall buildings and its contrasting low-rise neighborhoods. More recently, we have seen a proliferation of mid-rise buildings along the city’s “Avenues.” This is despite the many challenges and costs associated with this building typology.
But I think it’s pretty clear that a further evolution is also underway. Laneway housing, which is now permitted “as-of-right,” is in the early stages of being adopted and built out all across the city. And eventually I think we’ll see many of Toronto’s laneways evolve into fully fledged residential streets; perhaps not all that dissimilar from what you might find in compact cities like Tokyo.
This is very exciting to me and I think of it as the city gaining a third hierarchy of residential streets. We’d have our major arteries and avenues. We’d have our residential side streets. And then we’d have our compact laneways. Dare I say that maybe some of these laneways could even house non-residential uses such as small-scale offices.
But along with this shift, I think it’s time we look at another infill opportunity — something that planners Blair Scorgie and Sean Hertel are calling “density transition zones.” What these zones hope to be is a new middle transition zone between low-rise neighborhoods (where laneway suites are already permitted) and mid-rise avenues. A place where “missing middle” type housing might be built in close proximity to major streets and existing transit. Let’s call it a 100-200m zone that sits right behind our avenues.
In my mind this is immediately beneficial for two reasons. The first is obvious. It could be a place for frictionless missing middle housing. Housing that’s more dense than a single family home + laneway suite, but less dense than a typical mid-rise building.
The second immediate benefit is that this transition zone could be used to help improve the overall feasibility of mid-rise avenue development. The reality is that there are many blocks along Toronto’s avenues where the lot depths are simply too shallow for proper mid-rise buildings. Density transition zones could help with this, which would be not that dissimilar from how “Enhancement Zones” were intended to work (they were never approved).
If this were to happen, I think there would also be a strong case for softening some of the “requirements” in the mid-rise design guidelines. Requirements like the 45 degree angular plane that new buildings generally need to conform to. All of this would only help the overall feasibility of more European-scaled developments along Toronto’s avenues and, in my opinion, that would be a great thing.
But for the same reasons that Enhancement Zones were highly contentious, I would expect a lot of grouchy people and a lot of pushback on this idea. There will be concerns about encroaching on our single-family neighborhoods, and there will be the usual objections that come up with any new development (density, traffic, dog poo, etc.) But if we’re serious about building more missing middle housing, we are going to need to find ways to remove the barriers to entry. This scale of housing is simply too small to support a great deal of friction.
To learn more about how density transition zones might work, I would encourage you to check out the great site that Blair and Sean have put together, over here.
Image: Density Transition Zones
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European Alps are home to a third of the world’s ski resorts — but they’re mostly closed
This winter was supposed to be the 12th edition of a ski and snowboard trip that I do every year with a group of friends from both Canada and the US. Last winter we were in Fernie, British Columbia and this winter we were planning to go to Europe. But for obvious reasons, the trip has been cancelled. It’s going to be a tough season for the ski industry.
According to this recent FT article, the European Alps are home to more than a third of the world’s 2,084 ski resorts. Typically, these resorts bring in about €28 billion in revenues over the course of a season, which is similarly about a third of the global total and almost 7% of the value of the European Union’s overall tourism market.
But many/most resorts are closed right now. France has shuttered all ski resorts until at least January 7, 2021. And Switzerland, while “cautiously open,” is apparently getting pressure from its neighbors to close down again as further quarantine restrictions are put in place.
Interestingly enough, some resorts are already reporting higher than normal early bookings for the 2021-2022 season. This is according to the same FT article. Instead of several hundred early bookings, which would be typical, they’re reporting several thousand. And many of the bookings have moved upmarket compared to prior years.
What this starts to indicate is that we are likely to see an explosion in travel and leisure spending as soon as people feel safe and as soon as these restrictions are lifted. Demand is getting pent-up right now and that can mean only one thing: the 12th annual ski and snowboard trip needs to be a banger.
Charts: Financial Times
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Inaugural consumer trends report — what changed and what might stick
The New Consumer and Coefficient Capital recently teamed up to publish their inaugural consumer trends report. It is a look at what changed this year and what might actually endure as we get past all of this.
Some of it is perhaps intuitive once you see it. Makeup consumption is, for example, way down and home scent sales are way up. See above chart.
And some of it I disagree with. Their survey results suggest that 81% of Millennials (and 66% of all consumers) are now perfectly content working out at home, as opposed to going to a gym. I am firmly in the 19% here. Get me back to the gym.
But what is clear is that this year has accelerated a number of consumer trends that were already underway and so there are likely to be some structural changes as we move forward.
To read the entire report, click here.
Chart: Consumer Trends 2021
