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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  • Developer Dirt: Site selection and acquisition

    I’ve already spoken about why I became a developer and offered some insights into how you might be able to transition from architecture into development. So now I’d like to start focusing more on the day-to-day of what it means to be a real estate developer.

    And since I seem to be getting a lot of questions from readers on career and development related topics, I’ve decided that I’m going to turn these posts into a regular blog series. Right now the working name is “Developer Dirt”, but if you have a better name I’m all ears (let me know in the comments below).

    So let’s start with step 1.

    You’re ready to develop a new project and you’re now in the market for some land (also known as a site). It could be a greenfield site (meaning it’s virgin land that hasn’t yet been tainted by humans) or, on the other end of the spectrum, it could a brownfield site (meaning it probably once housed industry, it’s contaminated as all hell, and you’re going to need to clean that puppy up before you build).

    Without going into further detail about all the different kinds of sites you could potentially buy (which is a post in itself), here are 3 high level things to keep in mind as you move forward.

    Land is the residual claimant

    What this means is that you want to start with your top line. You want to start with revenue. What can I build on this site (use and square feet) and how much can I ultimately sell or lease that space for?

    Let’s say, for example, that you think you can build 100,000 square feet. If it were office space, you’d want to know that rents in your area are $30 per square feet and that that’s going to render you $3M a year in rental income. If it were residential condos, you’d want to know that the market is absorbing $500 per square foot and that if you sold 100,000 square feet worth of condo, that your revenue would be $50M. But remember this is top line.

    Once you know your top line, you then need to figure out what it’s going to cost to bring you that revenue stream. In other words, what are the hard costs (construction costs), the soft costs (consultant fees and other non-construction costs), the return my investors are going to demand, the money I need to keep the lights on in my business, and so on.

    Hopefully, once you’ve calculated all of these numbers, you’ll have some money left over from that original top line number. That residual money is what you can reasonably afford to pay for the land, which is why it’s often referred to as the residual claimant. But even though it comes last in this example, it comes first in development. If you overpay at the onset, it’ll be an uphill battle the rest of the way.

    You often don’t know what you can build

    But here’s the rub: You often don’t know exactly what you can build. When developers buy land they often consider what they can build “as-of-right” and what they think they can build as a result of variances, rezoning and other discretionary actions.

    As-of-right basically refers to what the current zoning permits. It’s what you could go out tomorrow and build (after you get the requisite permits of course). Unfortunately though, as-of-right uses and densities are not often inline with what’s actually happening in a neighborhood. So you need to go into the city for things like a zoning by-law amendment.

    Similarly, vendors want the most for their land and so they’re going to be aggressive on this front. As a developer, this is the point where you surround yourself with a team of smart people who can help you figure out what’s reasonably attainable for the site in question. And sometimes you have to worry about the politics as much as the planning.

    Approvals are uncertain

    During the due diligence phase, the goal is obviously to mitigate as much of your risk as possible. Nobody wants to get stuck with a piece of land that they overpaid for that they now can’t (profitably) develop. But sometimes shit happens.

    It may seem like a no brainer. You could have a site that’s surrounded by transit with lots of great precedences (this matters) for the height and density that you’re hoping to obtain and that you feel will be appropriate for the neighborhood. But sometimes the stars don’t align.

    And that’s why development is a risky game.

  • Revisiting the Gardiner East debate

    Last week I argued that the eastern portion of the Gardiner Expressway (Jarvis Street over to the Don Valley Expressway) should be torn down and replaced by an enlarged Lake Shore Boulevard.

    To quickly summarize, here’s why I support removing the Gardiner East:

    • Now is the time to do it (before we develop the surrounding area and it becomes both more expensive and more difficult to do it).
    • It would go a long way to stitching our disconnected downtown back to the lake and realizing our ambitions for the revitalization of the waterfront.
    • Unlocking the full potential of our waterfront is hugely important.
    • In my opinion, the only way to build a big, well functioning city, is on the backbone of public transportation. And this—the tearing down of the Gardiner East—could represent that paradigm shift.
    • It is a portion of the Expressway that has relatively low traffic volumes.
    • It’s the cheapest option on the table.

    Somewhat surprisingly though, a lot of people disagreed with me. They told me that adding anything to our already long commutes would be simply unconscionable and that they would not support it, no matter how much it improved our waterfront.

    So in the spirit of avoiding confirmation bias (that is, only seeking out things that reinforce an already established belief), I thought I would share the following article: “Like It or Not, Most Urban Freeways Are Here to Stay.” It’s from Atlantic Cities and there are 3 key take-aways that I’d like to point out.

    First, I thought it was interesting that the interstate system in the United States was, from the onset, always conceived of as a solution to urban congestion. I always thought it was about connecting the country, but that, apparently, was a secondary goal.

    Second, cities all across North America are engaging in the same debate about what to do with their aging highways. Detroit is debating. New Orleans is debating. And so is Syracuse. Toronto is not alone. But we could be alone in taking the lead on this issue.

    Third, the author basically acknowledges that, while not ideal, we’re stuck for the time being with all these freeways and that the better solution is going to be a really tough slog:

    “This is not an easy assignment, seeing as how cars are purchases we make with our hearts, more than our heads. Logic won’t convince Americans to change their ways. What will? Maybe, over time, prohibitive fuel prices and withering tolls, and, most importantly, investment in useful and convenient public transit. Only when the carrot is irresistible, and the stick stings too sharply to bear, will the shift begin, and it will take years to play out.”

    And while I would agree that it’s not going to be easy, that’s par for the course with anything truly worthwhile. If it were easy, everyone would be doing it. But they’re not. And that’s why there are leaders and there are followers.

    People in Toronto like to talk about how our City sometimes lacks vision. Well, here’s our chance. I’m not worrying about what the commute is going to be like tomorrow, because I know there’s an even better solution for that problem. I’m worried about something even bigger. I’m worried about the kind of city we’re all going to leave behind to our children.

  • Is gentrification really the problem?

    James Frank Dy Zarsadiaz (a Ph.D. candidate at Northwestern) published an article in Atlantic Cities a few days ago called, “Why gentrification is so hard to stop.”

    In it, he essentially talks about how neo-liberalism has allowed private interest to trump public good and how it has dramatically changed cities and the expectations of its residents:

    “…those who can afford to live in a city now expect a personalized, “just for you” urban lifestyle. For-profit companies chase these urbanites with upscale housing and creative marketing campaigns, transforming blighted and blue-collar neighborhoods into “livable” urban nooks.”

    Now, as a developer I know I’m biased here, but is gentrification really as evil as he makes it out to be?

    One of the most insightful comments on the article had the following to say:

    “I’ve always maintained that gentrification is what occurs when demand exceeds supply and blight is what occurs when supply exceeds demand.”

    I like it because it’s a simple way of saying that what we are seeing is a natural market outcome. What’s wrong with somebody wanting to buy a house in a marginal area and fix it up? Can we reasonably expect to stop people from doing this so that wealth never increases within a neighborhood?

    The bigger issue, in my view, is rising income inequality. We know that this is becoming more and more of an issue. The benefits to being smart and educated today are huge. So how do we ensure that we’re not creating a society of haves and have-nots?

    Let’s figure this out and let people buy whatever homes they want.

  • The tale of 2 Chicagos

    Over the long weekend I wrote a post called “On medium density development.” My argument was that Toronto has gotten exceptional at building infill towers, but not so great at midrise and other medium density infill solutions. Though to be fair, we are starting to see more and more of that today.

    Well it turns out that Chicago is in a similar, if not worse, position. According to Aaron Renn of the Urbanophile blog, most of the city (outside of the city center) only allows for single family homes. Though in some cases you may be allowed a duplex or triplex.

    Here’s a map:

    image

    The red is where you’re only allowed to build single family homes. The yellow represents non-residential uses (parks, industry and so on). And the remaining black is where you’d see high density development. Note how it runs all along Lake Michigan. Both Toronto and Chicago are developing in a similar “T” formation.

    Now, some of you may be saying to yourself: So what? But it’s important to remember that this type of zoning effectively creates a supply constraint in the market, which, as I’ve argued before, will drive up prices. Chicago may as well be surrounded by mountains, because that red area seems almost untouchable from a development standpoint.

    With so many people rushing back to cities today, a lot of them are struggling to create the same market environment that our parents enjoyed. You know the one where you finish school, get a job, and then you’re able to buy a house. But I think it’s because many of our cities are at a turning point, and yet are clinging to outdated principles of city building, such as single-use zoning.

    But I’m certainly no expert on Chicago, so if you are, please speak up in the comment section below.

  • Say hello to Kingston&Co

    image

    As of today, Family Day Monday, you’re going to start seeing information released regarding TAS’s (in partnership with Main & Main) newest community called Kingston&Co. It’s located on Kingston Road, just east of Victoria Park Avenue, in a neat area called Kingston Road Village. You can already register at kingstonandco.ca. And as part of the registration process, we’re also soliciting feedback as to the types of retail the community would like to see added to the area. Note: There’s already a Starbucks 🙂

    At the same time, we’ve also launched a redesign of our corporate site (tasdesignbuild.com). The biggest change is that we’ve taken the blog—which was hidden under a “Neighbourhoods” tab—and made it front and center on the homepage. We see this as a pretty significant change. One that shows that we would like you to join us in a conversation around city building. We now allow comments on all of our blog posts and you can see right on the homepage who the author of the post is.

    If you have any feedback on either Kingston&Co or the new homepage, we’d love to hear from you in the comment section below.

  • On medium density development

    Over the past decade, Toronto has seen a proliferation of condos across the city. And while I do think this intensification is a great thing, we’ve been much better at building towers than anything else. We’ve neglected medium density development and it has bifurcated our housing market: you’re either in the market for a condo or for a house.

    And since we’re not really building anymore of the latter, Toronto has become accustomed to bidding wars and multiple offers. Every young couple I know is in the market for an “hip fixer-upper in the city.” Problem is, that’ll cost you $700,000 or more and you may still need to gut it.

    At this point, it’s not realistic to expect that we’ll be building anymore single family homes in the city—at least not at any sort of significant scale. We’re tapped out. But what we can reasonably expect is more medium density development. I’m talking about midrise developments along our avenues, laneway houses in people’s backyards and other creative infill solutions that sit somewhere between a house and a highrise.

    If we’re concerned about creating equitable housing opportunities, then we’re going to need relieve some of the pressures on low rise housing. We’re going to need more diversity in our product offerings.

  • Is laneway housing a good idea or a bad idea?

    As a follow up to my recent post called “Disrupting everything”, I thought I would share this talk by venture capitalist Chris Dixon at Y Combinator’s Startup School. In it, he talks about why good ideas often seem like bad ideas at first.

    Chris frames the discussion by saying that when you have a good idea—that everyone else thinks is a bad idea—you effectively know a secret. But by a secret, it’s really that you believe something that nobody else believes to be true. So much so that when you try and tell everyone else about your secret, they all think you’re crazy, which is frustrating because it seems so obvious to you.

    He then provides a number of characteristics that can help you identity good ideas that seem like bad ideas:

    • Powerful people dismiss them as toys.
    • They unbundle the functions done by others.
    • Did it originate as a hobby?
    • Do they challenge social norms?

    Now, he’s obviously talking about startups, but I think the framework can apply outside of the technology world. I think it can apply to cities. 

    To give you one example, let’s consider laneway housing. If you’re a regular reader of this blog, you’ll know that I’m a big supporter of laneway housing in Toronto. But that it’s something the city generally does not support.

    However, there are laneway houses being built and they’re being built by architects and progressive urbanists. Some might even call it a hobby, because it remains a pretty tough business model at the moment.

    Personally, I think one of the main reasons the city is unwilling to formally allow laneway housing is because it challenges social norms. I’ve read the staff reports and the meeting minutes: people think it’s weird to live off a laneway. In fact, in one case somebody asserted that since laneways are generally undesirable urban spaces, anybody who would want to live off one is almost surely a social degenerate.

    But there’s absolutely nothing inherent to human beings that says we can’t live off a 5m wide street or that we can’t have a “house located behind another house.” Those are simply constructs we’ve created for ourselves.

    So the next time you hear about an idea that you think seems like a bad idea, ask yourself: Is it really a bad idea or does it just make me feel uncomfortable because it contravenes the norm? Taking yourself out of your comfort zone is a good thing. It’s how we grow.

  • Why the Gardiner East should be torn down

    Warning: This post turns into a bit of a rant near the end 🙂

    Since 2009 (well, much earlier actually), Toronto has been trying to figure out what to do with the eastern portion of the elevated Gardiner Expressway (the portion from Jarvis Street to the Don Valley Parkway). The process used to help make this decision is called an Environmental Assessment (or EA) and that’s what is currently underway. But it’s a painstakingly slow process.

    Recently though, a third public meeting was held in order to solicit feedback on the various design solutions and so there’s been a renewed interest in this city building issue. Since the beginning, my position has been that we should tear it down. And in this post I’m going to explain why I think that is exactly what the city should do. 

    But first, a bit of background.

    The EA started by identifying four “Alternative Solutions” to the problem of the Gardiner East. And they are: 

    1. Maintain the elevated expressway (Basically do nothing)
    2. Improve the urban fabric while maintaining the existing expressway
    3. Replace with a new above or below grade expressway
    4. Remove the elevated expressway and build a new boulevard

    They then went out and assigned these solutions to a bunch of architects and designers—whom are some of the world’s best—and asked them to come up with specific design proposals. These proposals are available online and that’s part of what the public has been commenting on.

    City Council seems to generally want the Gardiner down, but there are some naysayers. 

    Rob Ford doesn’t want it removed (option #1) because it’ll add to driver commute times (no surprise there) and Councillor Denzil Minnan-Wong is worried that tearing it down will just lead to another wall—a wall of waterfront condos.

    But I think these views are terribly shortsighted and I’ve made my position clear by submitting a formal response through the City’s public engagement portal. To explain my view here on Architect This City, I thought the best way would be to simply share my answers. So here they are.

    What do you like?

    [slideshare id=22945545&sc=no]

    I can honestly say that I love my city. I was born in this city. And I was raised in this city. This city has given me so much, which is why I feel so compelled to try and give back to it. It’s also the reason why I’m first to defend it when people talk about how great this or that city’s waterfront is and how much ours sucks. I mean, I know ours sucks. But we’re fixing it.

    We have a lot of great plans in the pipeline for our waterfront, but there’s a remaining obstacle: our elevated expressway. Boston buried theirs. And San Francisco transformed theirs into a magnificent public space. What are we going to do with ours? Now is the time to be bold and not settle for the status quo. That’s too easy. We need to remove the eastern portion of the Gardiner Expressway today and the design proposal by Field Operations offers a brilliant way to do it.

    Not only is removing the Gardiner the most cost effective solution ($470M, versus $870M to maintain, $865M to improve and $1.4 billion to replace), but it’s also the most desirable from a city building standpoint.

    The Gardiner is not the only barrier. We also have the rail lines. So while repurposing the Gardiner might be doable in isolation, we simply have too much friction standing between us and the lake. We need to remove the barriers that we can. It’s for this precise reason that Field Operations spent so much time worrying about the north-south connections. And I think their “architectural sleeves” are a really interesting way to solve this problem.

    At the same time, timing is an important consideration. As the surrounding East Bayfront area develops, it’s only going to become more costly to remove this stretch of the Gardiner. If we’re going to do this, now is the time.

    Finally, I think it’s important to note that Field Operations is the landscape architecture firm behind the wildly successful High Line in New York. So what we have is a firm that made a name for itself repurposing an old elevated rail line, telling us that our own elevated structure is worthless and uninspiring. Think about that for a minute. Should we really be spending more money to salvage the Gardiner East?

    What concerns do you have?

    That we’re getting hung up on commute times as one of the key decision making criteria. It’s a red herring. Let’s face it: irrespective of whether we tear down the eastern portion of the Gardiner or not, Toronto is fucked from a transportation and infrastructure standpoint. We’re sitting on decades of disinvestment and some of the longest commute times in North America.

    Field Operations put it well when they said that the tearing down of the Gardiner East needs to be thought of as a paradigm shift. We have a 25-year transportation plan waiting to be funded. Let’s go out and do that instead of trying to sacrifice our waterfront so that suburban commuters can save a few minutes. Let’s give them a shiny new train instead. They’ll like that.

    Either that or Torontonians need to stop talking about how great Chicago’s waterfront is, because we can do it too. Now is our chance.

    What advice do you have for the Project Team as the study moves into the next phase?

    Don’t listen to Rob Ford.

  • Disrupting everything

    Last year when I started working on Dirt—which was really my first startup—I had a number of people say things to me like: “Wow, that’s quite a change, going from real estate into tech.” But that’s not the way I saw and see it.

    I don’t think you can silo industries like that anymore. Technology is touching everything. Some would even go so far as to say that every company in the world is, or will be, a software and technology company.

    The way I looked at it was that I was starting a technology-enabled real estate company. I was hoping to leverage the internet to improve the way things are done in an existing industry. Of course, by improve I really mean disrupt—which is arguably the biggest buzzword in the tech community today:

    “Disruption is not so much a trend as an especially lucrative world philosophy favored by technophilic entrepreneurs. It’s the only path towards progress. If you’re not disrupting something you might as well go collect kindling and roast raccoon meat in the hills of Cupertino.”

    A good example of how disruptive innovation is reaching all sectors of the economy, including government, is the New Haven-based startup called SeeClickFix (which I discovered via This Big City). What it does is allow citizens to report non-emergencies (like potholes) to their local government. Governments can then respond and manage these tasks. (Sorry Rob Ford. Now you don’t need to return all those phone calls.)

    But moreover, I think it shows that technology is not only going to disrupt business and industry, it’s going to disrupt the way cities function and the way we live. I don’t know what that’s ultimately going to look like, but I can already feel it underway.

    Albert Wenger, of venture capital firm Union Square Ventures, recently argued—in a talk at DLD—that we are still in the midst of a transition from the Industrial Age to the Information Age. And I buy that. With every new disruption, we’re one step closer to completely making that transition. But we’re not quite there yet.

    The Industrial Age drove people out of cities. It made cities dirty and undesirable. But in the Information Age, cities are damn important and it’s where people want to be. Look at all the people rushing back to urban centers.

    So if technology has the power to disrupt business, industry, and cities, I suggest we stop just thinking about technology in isolation and remember the powerful words of Marshall McLuhan: “The medium is the message.” Don’t just focus on the obvious or you’ll miss a tidal wave of change happening beneath the surface.

  • Mapping where people run

    I’ve been meaning to write this post for about a week now. I stumbled upon a set of maps via FlowingData that used public running data to plot where people run in various cities around the world. And since I love maps, I couldn’t resist.

    Here’s Toronto:

    Here’s New York:

    Here’s San Francisco:

    And here’s Philadelphia:

    For the full set of maps, click here.

    What’s interesting is how people tend to gravitate towards the water rather than the parks. In the case of Toronto, High Park is barely touched, which may have something to do with the fact that it’s too far from downtown. The data could also be skewed based on the type of people who make their running data available and where they happen to live.

    Either way, a neat set of maps.