Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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  • What’s next for cities? Probably more of the same.

    I am surprised, although maybe I shouldn’t be, by how quickly many seem to be allegedly turning their back on cities. According to the New York Times, cities were “losing their allure” well before this pandemic, and this might just be the tipping point. The underlying argument: Density is bad. We should probably all move somewhere bucolic, where the cost of housing is less and work isn’t so stressful. Zoom only when necessary.

    But as the chief economist for Indeed, Jed Kolko, rightly points out in the article, how people behave (and think) during a global pandemic is probably not a great indicator for how they will want to live their lives when this is all over. It’s also not clear that urban density is really the contributor of spread. Hyper-dense cities such as Seoul and Hong Kong have been performing relatively well. (Joe Cortright has some thoughts on this.)

    Once we get to the other side, we will see the data and we will get a better understanding of this current situation. And then in hindsight, we will find ways to rationalize the outcomes to ourselves. In the interim, I’m not about to bet against cities. Here’s how Paul Romer, professor at New York University, put it in this recent interview in City Journal:

    “I think the underlying economic reality is that there is tremendous economic value in interacting with people and sharing ideas. There’s still a lot to be gained from interaction in close physical proximity because such interaction is a large part of how we establish trust. So I think that, for the rest of my life, cities are going to continue to be where the action is.”

    Photo by bady qb on Unsplash

  • Slate Asset Management raises €250 million in third European real estate fund

    The below press release went out this morning. It’s a good news story that shows the resiliency of grocery and food logistics.

    On a related note, Slate Retail REIT also recently announced that, as of April 14th, it had already collected 80% of April rents and was outperforming the industry. At that time and based on industry feedback, the REIT estimated that a number of retail strip center landlords were seeing April rent collections in the range of 40-50%.

    TORONTO and LONDON, April 23, 2020 /CNW/ — Slate Asset Management (“Slate”), a leading alternative asset management platform with a focus on real estate, announced today the final close of its Slate European Real Estate Fund III (“Slate Europe III”). Consistent with its predecessor funds, Slate Europe III will target grocery real estate assets in Europe. The oversubscribed closed-end fund exceeded its target size of €200 million and closed at its hard-cap of €250 million.

    “During this unprecedented time of market disruption, we are pleased to close Slate Europe III at its hard-cap and are thankful for the confidence investors from diverse geographies continue to place in us as Slate expands its presence across Europe,” said Brady Welch, Slate’s London-based Founding Partner. “We have been investing in last-mile logistics for some time and are proud to launch our third fund in the European grocery real estate space since 2016, a feat that underscores our commitment to the sector and validates the importance of last-mile solutions in the grocery real estate market.”

    Since December 2016, Slate has completed a total of 250 grocery property acquisitions in Europe comprising over 450,000 square meters of gross leasable space. Slate has European offices in London, Frankfurt, Dublin and Luxembourg.

    About Slate Asset Management

    Slate Asset Management is a leading real estate-focused alternative investment platform with over $6.5 billion in assets under management. Slate is a value-oriented manager and a significant sponsor of all of its private and publicly traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm’s careful and selective investment approach creates long-term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a demonstrated ability to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

    For Further Information
    Investor Relations
    +1 416 644 4264
    ir@slateam.com

    SOURCE Slate Asset Management L.P.

  • New Brutalism in Dallas

    Mr. and Mrs. Gehan recently completed this home for themselves in the Preston Hollow neighborhood of Dallas. Mr. Gehan is the founder of a home building company called UnionMain Homes, but this home is like nothing the company builds. The architect, Scott Specht, describes it as being “new brutalist.” There’s exposed and ribbed concrete walls (which alone are reported to cost ~$720,000). But the sliding planes, cantilevered roof, and expanses of glass are reminiscent of the International Style, and in particular of the Barcelona Pavilion.

    At around 8,826 square feet, the house cost about $6 million to build (presumably this excludes the 1.5 acre land cost). That works out to around $680 per square feet, which once again goes to show you why “only the rich can afford this much nothing.” Minimalism is expensive. Here’s an excerpt from the WSJ: “He [Mr. Gehan] was amazed by the level of detail required and the complication involved in creating a clean and simple aesthetic. That less-cluttered, simpler look will start to make its way into his production houses, he says.”

    Photos: Specht Architects

  • Koto Design announces prefab partnership and two new house designs

    Koto Design, which I have written about before on the blog, has just announced both a partnership with Plant Prefab and two new home designs. Koto is based in the UK and is a designer of small and energy neutral homes and cabins. Plant Prefab is based in the US and is, according to Koto, the first prefabrication company entirely dedicated to sustainable building practices. This partnership — called Koto LivingHomes — now means that Koto’s designs are available for delivery in the US.

    The smaller of the two new designs is the Yksi House. It consists of two stacked volumes (pictured above) and is about 1,000 square feet. The ground floor has two bedrooms and the second floor houses the main living area. This allows the exposed roof areas of the lower volume to serve as outdoor spaces. You also naturally get better views from up top, which is one of the reasons why this configuration is so common across many vernaculars.

    If you’d like to play around with the Yksi House in 3D (directly in your browser), you can do that over here. It’s a wonderfully simple design. I know that the building industry has been talking about and experimenting with prefabrication for many generations (and it has never stuck), but I can’t help but think that as beautiful products like these become far more accessible and affordable, we might finally make it happen.

    Image: Koto Design

  • Deal is back on: Amazon to buy stake in Deliveroo

    This is an interesting business story. Deliveroo is a London-based online food delivery company that was founded back in 2013 and today accounts for a big chunk of the online restaurant platform market in the UK. (They are also developing a network of “ghost kitchens” through a subsidiary called Deliveroo Editions.)

    Amazon has been and still is interested in buying a minority stake in the company (Roofoods Ltd). But the Competition and Markets Authority (CMA) has been blocking it out of fear that it would stifle competition. The thinking was that if they blocked this deal, maybe, just maybe, Amazon would enter the market on its own. And more participants means more competition.

    The merger case was opened on July 5, 2019.

    Well, Deliveroo’s business is now struggling amid this pandemic. To deliver food from restaurants and then charge those restaurants a commission, it turns out that you typically need those restaurants to be open for business. So the CMA is now revisiting the case. Is it better to have Amazon invest in Deliveroo or have Deliveroo possibly fail?

    The CMA has decided that the former now makes more sense — at least provisionally.

  • How Europe is reopening

    Just over a month ago, as North America was beginning its lockdown, the Europeans were the ones showing us how to stay sane in quarantine through balcony orchestras and viral internet videos. Now we’re looking to them for how best to reopen the economy and minimize the number of fits and starts.

    • This morning Spain recorded its lowest daily death rate from the coronavirus. It is beginning to prepare for a phased relaxation of its lockdown rules. Things will not return to normal overnight. [Financial Times]
    • Spain allowed construction activity and manufacturing to resume this past week. As a reminder, Spain’s strict lockdown started on March 14. [New York Times]
    • Bookstores are open in Venice, but that’s about it. Customers have to enter one at a time, or schedule an appointment. Hotels, restaurants, and cafes remain shuttered. It is believed that at least 1/6th of all Italian restaurants and bars will not survive. Reopening is not happening uniformly across Italy’s 20 regions. [Wall Street Journal]
    • Last week, Denmark became the first country in the Western world to reopen elementary schools. The desks are far apart and teaching outside is being maximized, but some/many are concerned that this is too soon. Are we prioritizing the economy (i.e. free up the parents) over the health of our children? [New York Times]
    • The Czech Republic currently has one of the lowest number of cases on the continent. But hardware stores and bike shops are some of the only nonessential businesses that are allowed to be open. The Easter weekend saw an over 60% increase in year-over-year sales. Biking is something to do right now. [Wall Street Journal]
    • On Monday, the lockdown will be further relaxed by the Czech government. Weddings of up to 10 people will start to be allowed. Gyms are expected to open on May 11, but their change rooms will remain closed. (I’m surprised by this one.) Malls, hotels, and indoor restaurants aren’t expected to reopen until June 8 at the earliest. Should the number of new daily cases exceed 400 going forward, the government has said it will reimpose a lockdown. [Wall Street Journal]
    • The UK is not yet considering a relaxation of its lockdown. As of Sunday, the situation remains “deeply worrying.” The UK currently has the 5th highest national death toll. [Globe and Mail]
    • On April 13, Emmanuel Macron announced that France would begin a phased reopening of its economy — schools and some businesses — starting on May 11. This is a unique approach. He gave a firm date, well into the future. What if this doesn’t make sense when the time comes? Clearly the government felt that the psychological benefits of a firm date outweighed the potential risks. Minimize uncertainty during an uncertain time. [Le Monde]
    • Lots of discussion around the porosity of borders. Logically, there’s a view that unless there’s a common strategy, it’s better to keep borders closed. But what are the economic implications of doing that? [New York Times]

    Photo by Grant Lemons on Unsplash

  • It’s time to build

    Marc Andreessen’s recent essay, called “It’s time to build,” is destined to ruffle feathers. In it, he not only sings the virtues of building in its broadest sense — everything from healthcare and housing to education and manufacturing — but he calls out the western world for smug complacency with the status quo. We are no longer choosing to build. And a good example of that is how we have been managing (and mismanaging) this current pandemic.

    Here’s an excerpt:

    In fact, I think building is how we reboot the American dream. The things we build in huge quantities, like computers and TVs, drop rapidly in price. The things we don’t, like housing, schools, and hospitals, skyrocket in price. What’s the American dream? The opportunity to have a home of your own, and a family you can provide for. We need to break the rapidly escalating price curves for housing, education, and healthcare, to make sure that every American can realize the dream, and the only way to do that is to build.

    Marc has also included a suggested reading list if you click through on the above tweet. By the time you do that, I am sure there will also be a lot of discussion around his essay.

  • The future is unknowable

    I am sure many of you are getting tired of the news. I know I am. But it turns out that when you’re in a global pandemic and you spend the entirety of your day looking at Zoom — while fidgeting your leg, I might add — there’s only so much else you can talk and write about.

    One of the more interesting things you could read is Howard Marks’ memos. Howard is the co-founder of Oaktree Capital Management and, from what I can tell, he’s been writing since 1990. Some years it’s an annual memo and some years — like this year — he writes a bunch more. His most recent is regarding, “Knowledge of the Future.”

    If I had to summarize it: The future is unknowable and none of us can say with any certainty what the next quarter or the next year is going to look like. In Howard’s words: “These days everyone has the same data regarding the present and the same ignorance regarding the future.”

    Most of the time, he explains, we simply extrapolate from the past and then apply our own biases to come up with a prediction. Howard describes himself as more of a worrier, whereas I would describe myself as more of an optimist. I believe, to a certain extent, in creating self-fulfilling prophecies.

    Notwithstanding our inability to predict the future (which isn’t a new phenomenon), I think it’s important to have opinions and take positions. Any decision is better than no decision, right?

    For a full archive of Howard Marks’ memos, click here.

  • $27 million worth of condos in New York

    This week it was reported that a South American family has bought and closed on ~$27 million worth of residential condos at Waterline Square in Manhattan. Apparently they went into contract (after the online showings) and closed on the same day, which I suppose you can do when it’s an all-cash deal like this was. The agent, Maria Velazquez, didn’t disclose who the family was, but apparently they’re from Peru and they wanted a safe place to park their money during this pandemic. Uncertain times usually create buying opportunities, and it sounds like the family did get a bit of a bulk discount here. But it’s also interesting to see where capital is flowing right now and what is perceived as a safe haven. Residential real estate in one of the world’s preeminent global cities probably won’t come as a surprise to any of you.

  • The swimming pools of Paris

    For years, French photographer Ludwig Favre has been doing a series on the swimming pools of Paris. The first one he photographed (and the first photo below) was the Piscine Pontoise. Designed in 1933 by architect Lucien Pollet, Pontoise was one of four pools that he completed for the Piscines de France at that time. Another one of his designs was the Piscine Molitor (second picture below), which is the most famous of the bunch for a few reasons. It was the place to be seen in Paris when it first opened. It was where the world’s first bikini was apparently unveiled. And it was also abandoned and almost demolished, during which time it got filled with street art. If you aren’t familiar with the work of Ludwig, I would encourage you to check out his portfolio. He does an incredible job showcasing these pools, as well as many other aspects of our cityscapes.