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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  • Junction House featured in the Toronto Star

    This morning the Toronto Star published a profile piece on one of Junction House’s earliest purchasers: Barbara Martinez. Barbara downsized from a house to a 1-bedroom condominium in Roncesvalles, but then realized that she still wanted space to entertain and have guests over. So she decided to buy a 3-bedroom penthouse at Junction House with an approximately 350 square foot terrace. That’ll work. It is truly one of the nicest suites in the building, and will come equipped with a view of the Toronto skyline that looks something like this (see background projection below):

    I am quoted in the article as saying that mid-rise condominiums in Toronto’s neighborhoods naturally tend to attract a different set of buyers compared to, say, a downtown tower. That is true and we are seeing it play out at Junction House. Yes, we have 1-bedroom suites that are perfect for young professionals and/or investors, but we also have some spectacular 2-storey suites (the House Collection) and larger single-storey suites for people just like Barbara. Congratulations on your new home purchase!

    Photos: Steve Russell for the Toronto Star

  • How Opportunity Zones may have impacted real estate prices

    The Tax Cuts and Jobs Act of 2017 (US) created something known as Opportunity Zones. These are low-income and high-poverty census tracts that are designed to attract investment by offering a number of different tax benefits. I first wrote about it on the blog, here.

    Now that some time has passed since the final Opportunity Zones were announced, Zillow Economic Research decided to look at the possible impact of this designation on real estate values. In other words: To what extent, if at all, are the tax benefits getting capitalized into the value of the properties?

    Below is a chart showing the year-over-year change in the 12-month moving average sale price for low-income census tracts that were (1) eligible and selected as an Opportunity Zone; (2) eligible and not selected; and (3) not eligible.

    My understanding is that the “not eligible” category represents census tracts with similar characteristics to the other two categories but, for whatever reason, were not eligible to become an Opportunity Zone. There are criteria.

    The program is still quite new, but what Zillow found was that the eligible census tracts (green and yellow lines) seemed to exhibit similar sale price increases after the Act was signed, but before the final Opportunity Zones were announced. Once the final Zones were announced, sale prices in the selected category (green line) began to surge and move away from the pack.

    This may be evidence that the tax benefits are starting to get capitalized, or it may not be. One question I have is about why pricing in the selected Opportunity Zones seems to be a lot more volatile — even before the Act was announced.

  • Exploring KING Toronto

    Today I stopped by the Exploring KING exhibit that is currently on at 134 Peter Street. It is an exhibition celebrating the design of KING Toronto.

    It explains how the design came about. Note all the different unit layouts on the floor.

    It includes (foam) study models that go as far back as 2015. That’s four years of design iterations.

    It has samples of the glass blocks that will be used on the building’s facades.

    Related article: Glass blocks, that staple of 1980s kitsch, are trendy again. Sorry, it’s behind a paywall.

    It has a VR setup that allows you to explore the building’s inner courtyard. It’s going to be a fun space.

    And there’s even a KING Toronto candle for sale. (Aromatic woods with spicy overtones.)

    I thought the overall exhibition was very well done and I am thrilled to see architecture and design so front and center. It is an exciting time to be living in this city.

  • Barcelona from above

    Barcelona is one of the densest cities in Europe. And Márton Mogyorósy’s recent photo series, called Barcelona from above, does an excellent job of demonstrating that. My favorite photo is this one here, showing La Barceloneta neighborhood adjacent to the beach:

    None of the buildings are particularly tall (maybe 6 or 7 storeys at the most), but the streets are probably only about 6m wide, including sidewalks. This is one way that you can achieve density without height and it is a good example of what I was getting at in my post, European-style height, but not density.

  • IPOs and home prices

    Fred Wilson made an interesting remark in his recent post about the current “IPO bonanza” that is taking place in the tech space. He is, of course, talking about the recent IPO of Lyft, the recent S-1 filings from Pinterest and others, and the expected filings from Uber, Airbnb, and so on.

    After listing the benefits of going public, he went on to say that this bonanza will surely also mean that it is going to become even more unaffordable in the Bay Area. Part of this is perhaps self-serving, since he operates a VC firm out of NYC. (Take your money and move to NYC.)

    But the data suggests that there is truth to this.

    When Twitter when public in 2013, it was estimated that it created some 1,600 millionaires. This is great for the local startup ecosystem as many of these beneficiaries could go on to found their own companies and create a whole new batch of jobs. The money gets recycled.

    But what does it do to the local housing market — especially a supply-constrained one like that of the Bay Area where it is difficult to build?

    In 2018, Barney Hartman-Glaser, Mark Thibodeau, and Jiro Yoshida penned a paper called, Cash to Spend: IPO Wealth and House Prices. In it, they looked at the impact of IPOs on local home prices in California from 1993 through to 2017.

    What they found, among other things, was a “positive and significant association between local house price changes and firms going public.” The price increases were also found to be the greatest the closer you get to the headquarters of the firm that just went public.

    If you’d like to download a copy of the paper, you can do that here.

  • The compound effect

    This evening I was at my alma mater, the Rotman School, for a conversation between Roger Martin (the former dean of the school) and Canadian-Jamaican billionaire, Michael Lee-Chin. Michael is one of the most disciplined, consistent, and charismatic people I have never met. (The soothing Jamaican accent probably doesn’t hurt.)

    One of his points this evening was about compounding. Not just compound interest, which is what many of you are probably thinking, but compounding in life. The thing about compounding is that the real benefits come later on. That’s why personal finance people will tell you that the key to financial freedom is to start saving and investing early on.

    The problem with this is that, well, the real benefits come later on. And it can be frustrating when the rewards don’t seem to match the efforts. That’s why grit is so important and why some have suggested that it is a far better predictor of future success than things like IQ or a GPA score. There’s no substitute for hard work.

    In the development business, projects tend to take a long time. We started working on Junction House back in 2016 and here we are now in 2019 planning for construction. So I thought this evening was a good reminder that there’s lots of value in long-term goals and that more of us (including companies) should be thinking along these lines.

  • Holding a shadow

    Debating the merits — or shortcomings, depending on which camp you’re in — of all-glass buildings isn’t new. But there seems to be a bit of a resurgence happening right now because of the recent opening of Hudson Yards in New York.

    There’s an important environmental consideration here: Glass is, as a rule, a poor insulator. But often the other concern with all-glass buildings is their sameness. Witold Rybczynski recently wrote about this on his blog in a post called The Transparency Trap:

    Le Corbusier described (modernist) architecture as “the masterly, correct and magnificent play of volumes brought together in light.” Corbusier used glass but he never designed all-glass buildings. Neither did Mies; he added superfluous I-beams to his facades (which also had substantial spandrels). The problem with transparent glass is that it doesn’t hold a shadow, and without a shadow there can be no “play of volumes.” Since minimalist modernist architecture doesn’t offer decoration or ornament, that doesn’t leave much to look at.

    Witold isn’t usually appreciative of that which is new and I often find myself disagreeing with this critiques. But I like his metaphor of “holding a shadow.” Light and shadow are, of course, fundamental to architecture.

    Photo by LinedPhoto on Unsplash

  • Homes for as low as $1

    I was reading today about some houses in Boca Raton, Florida selling for as low as $1.

    The reason they’re selling for nothing, in some cases, is because you’re required to join the local golf/country club as part of the purchase. Initiation fees could be in the range of $70,000 and that doesn’t include whatever ongoing fees you would also be responsible for paying.

    What this demonstrates is that there isn’t enough demand from the next generation to sustain the pricing for this housing type. Part of this probably has to do with simply cohort size (the number of people retiring), but I suspect that there may have also been some changes in consumer preference.

    Some of it is probably golf related. Participation in the sport is relatively tepid among Millennials. And some of it may be related to the fact that these communities don’t have the kind of (urban?) amenities that the next generation is looking for.

    But if you derived enjoyment from the home during your retirement years, maybe it’s not the end of the world that there isn’t a strong resale market.

  • Manhattan is getting a congestion pricing zone

    About a year ago I wrote about how NYC is considering a congestion charge on vehicles entering Manhattan below 60th street. Well it looks like that plan could be adopted as early as April 1 (however the fees won’t start until 2021).

    Here’s a map of the proposed congestion pricing zone from the NY Times:

    I have written extensively on road pricing over the years and so I won’t repeat myself here today. Suffice to say that I think creating a sustainable funding source for transit and other mobility options is a positive step forward.

  • The perfect city

    “This book is a love story of cities. It is so well observed — the places, the people, the history and what the future holds. Joe tells a very personal and beautifully written story direct from the front line. An absolute must read for everyone who cares about, and wants to understand, what makes cities and their citizens tick.” 

    – Dame Alison Nimmo, Chief Executive of the Crown Estate

    Joe Berridge, of Urban Strategies, has a new book coming out called, Perfect City: An Urban Fixer’s Global Search for Magic in the Modern Metropolis. Perfect may be the enemy of good (as they say), but Joe argues that all great cities have moments of perfection that we can learn from.

    I just preordered a copy. If you’re interested, you can do the same here.