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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  • Snowboarders are annoying

    There are three resorts in the United States that do not allow snowboarding. They are: Deer Valley and Alta in Utah, and Mad River Glen in Vermont. New York-based Extell is also developing a new resort next to Deer Valley that was previously known as the Mayflower Resort. For a while, it was up in the air whether they would allow snowboarders, but this past summer it was announced that it will become part of Deer Valley and that their snowboarding ban will remain firmly in place.

    As a snowboarder, I’m not overly fussed by this. There are, of course, lots of other places that will welcome my kind. But I do think it’s both interesting and worth poking fun at. It speaks to the tribal-like nature of humans. I get down the mountain on this device and you get down the mountain on that device. So we are fundamentally different humans. And I do not want to associate with you. At the same time, I do respect the ability for private resorts to make their own decisions. And this seems to be what their paying customers want.

    But what about if the resort happens to be on public land? Does that make things any different? Deer Valley sits on land that is privately owned; whereas Alta sits on land that is owned by the National Forest Service. Which is why in 2014, a bunch of cantankerous snowboarders sued the resort, claiming that its ski-only policy violated the 14th Amendment to the Constitution. I’m not a lawyer, but I am told that this is typically used in cases involving discrimination.

    Alta ultimately won the case. They argued that even though the land they sit on is public, their lifts are still private. And so they get to decide who uses them. I guess that’s fair. But at the same time, this technically means that snowboarders are allowed on the mountain, they just can’t use any of the lifts. I tried to confirm this fact with Alta on X the other day, but they have yet to respond.

    In any event, my prediction is this.

    Snowboarding is a relatively young sport. It grew massively in popularity during the 1990s (which is when I switched over from skiing), and so its participants tend to skew younger (my assumption). This is probably why fancy resorts like Deer Valley don’t feel the need to cater to them. However, young people tend to both grow up and, you know, make more money. And so at some point — when there’s a real business imperative — we may find that people suddenly change their minds.

    If you’re trying desperately to sell luxury condominiums at the base of a resort and if snowboarders keep showing up at your sales office, for how long will you continue to say no to their money?

  • Cul-de-sacs and Dutch auctions

    I am, of course, more grid than cul-de-sac, but here is an interesting NFT art project that is launching on December 12, 2023 at 1PM EST. It’s called Cul-de-Sacs:

    “Cul-de-Sacs” explores the banality of suburban sprawl through the anachronistic stylization of American folk art. The algorithm generates flattened representations of suburbia at range of scales, interspersed with the remnants of rural life.

    The starting price is 0.2 ETH and the resting price is 0.05 ETH. What this ultimately means is that these NFTs are being offered by way of a Dutch action.

    Dutch auctions are a price discovery mechanism. They start with a high asking price and then gradually lower it until a price is reached where the quantity demanded equals all of the available supply.

    In other words, it’s a way to determine what the market thinks a particular thing is worth. In this case, though, the resting price is 0.05 ETH. Meaning there’s a floor.

    If lots of people are willing to pay 0.2 ETH for this art, it could sell out right away and that will prove to be the market price.

    But if few people want to buy it, then the price will gradually fall to 0.05 ETH, and that is where it will hang out until all of the available supply is absorbed. If/when that happens.

    Another important feature of this auction process is that if you buy early, and the price subsequently drops, you get a refund equal to the difference between what you paid and the final achieved price (thought to be the market price).

    So there is zero incentive to wait for a possible price decline; everyone ends up paying the same price no matter what. You’re encouraged to bid aggressively.

    And because all of this is now happening on a blockchain and enshrined in code, you can be confident that this is exactly how the process will work and that you’ll get any refunds that you deserve.

  • The banana test

    One of the reasons why “new small-scale retail, service, and office uses” are now permitted in low-rise neighborhoods of Toronto — and why many are on to talking about these uses in our laneways — is because it’s a way to serve the “needs of residents” and “reduce local automobile trips”. But what are these needs exactly? And if you had to choose only one, what would it be?

    Let me provide some further background.

    According to this mapping, 94% of Parisians live within a 5-minute walk of a bakery. And according to this mapping, 94% of people in Mexico City live within a 5-minute walk of a taqueria. So in other words, these two cities seem to have the kind of “small-scale retail, service, and office uses” that satisfy at least some of the needs of their residents.

    People in Paris need bread. And people in Mexico City need tacos. But what do people in Toronto need? I’m not sure we have a perfectly parallel thing. But according to Instacart, the top-selling grocery item last year across both the US and Canada was — bananas. One and four carts typically contain them, and apparently this number has remained fairly consistent.

    So maybe this should be our small-scale retail and walkability test metric: What % of the population lives within a 5-minute walk of fresh bananas? (I’m open to other food suggestions here.)

  • These are not unprecedented interest rates

    BlogTO recently asked: Is it a good time or a bad time to buy a condo in Toronto right now? My unsolicited opinion is that if you are someone who would like a home in Toronto, now is an excellent time to buy it. But that’s not actually what I want to talk about today.

    If you read the post, you’ll come across this line: “She emphasized that these are unprecedented interest rates…” Hmm. I think it’s important to point out that these are not unprecedented rates. Rates today are certainly higher than they have been for about two decades. But they’ve been even higher before and, if you go back to say the 1980s, rates today still look historically low.

    We just got used to ultra low rates and now we need to adjust to them being higher. And we will. The first step is feeling confident that rates won’t go even higher in the short term. Because if you think you know where rates are going to hang out, you can then make decisions around that.

  • Toronto’s laneways should be mixed-use

    Up until last year, non-residential uses within Toronto’s low-rise neighborhoods were typically legal non-confirming uses. Meaning, the use wasn’t technically allowed, but if it had been there for a long and continuous time, we would let it slide and say it’s legal.

    Then we decided that small-scale retail, service, and office uses might be kind of good in our neighborhoods. Especially if they empower people to perform their daily necessities without a car. So we agreed to allow these sorts of uses provided they don’t annoy too many people.

    But what about in Toronto’s laneways? Can and should they go there, too?

    Recently, we’ve spoken a lot about the case for bottom-up city planning, and the value of micro-spaces and micro-businesses (à la Tokyo). And my overarching argument has been that these are a positive thing for cities. They create opportunity by lowering the barriers to entry.

    But we need to get out of the way and we need small and affordable spaces. Which is why it’s hard to imagine a more ideal place than in our laneways, especially considering that there’s a long history of these spaces being used for exactly this. (Read this recent article by John Lorinc.)

    Fortunately, this idea continues to gain positive momentum, thanks to people like the late Michelle Senayah (co-founder of the Laneway Project) and Blair Scorgie (a partner at Sajecki Planning). So in my mind, it’s only a matter of time before we start getting out of the way.

  • My first Turo experience

    I used Turo for the first time this evening. For those of you who aren’t familiar, Turo is like Airbnb, but for cars. It connects people who have cars with people who need rental cars. Here is a photo of ours at SLC:

    The pickup was perfectly seamless. I got a text from an alleged human the day before. It said that they would leave the car on the second level of the parking garage next to baggage claim. And that I would get more precise instructions — such as where the key will be — after it was parked there.

    I was also told that there would be a small charge to pay in order to exit the garage. And that the charge would obviously depend on how quickly I retrieve the car after they park it. In my case it ended up being US$10, but we also stopped for food on the way.

    Overall, I’d say the pickup experience was easier and faster than your typical rental car. The car was as advertised. And thankfully, it was also there waiting for us. The two standout features for me are probably: (1) It was cheaper and (2) you get to pick your exact car. 

    This second one is important because sometimes you need a rental car so that you can drive it into a snow-covered canyon. And when faced with this situation, it can be helpful to know exactly what you’ll be getting — right down to the type of tires.

  • Montréal’s winter cycling retention ratio

    Montréal had its first snowstorm of the season this week, and if you look on X, you’ll find images and videos like these:

    What’s remarkable is the number of people who, at least from these tweets, continue to cycle in the winter. In fact, in the above video, there looks to be more bikes on the road than cars. Plowed lanes certainly help!

    According to the city of Montréal, about 80% of the network is maintained for year-round use (717 km of its 900 km network). But I’m sure that there are a lot of people who still can’t imagine anyone wanting to cycle in these conditions. So what is the actual winter usage?

    Thankfully, Montréal has bike counters. 55 of them to be exact. And all of the data can be viewed, here. The busiest location is Saint Denis and Rue des Carrières. This falls within their Réseau Express Vélo (REV) network, which is a series of protected lanes intended to do what the name suggests.

    The daily average for this counter is currently 4,403 riders, but the summer peak looks to be closer to 10,000. And this year, it has seen close to 1.5 million rides in total. This is a significant number. I mean, imagine 1.5 million more car trips on the road.

    Looking at yesterday’s data, the daily count was 1,292. If you very crudely divide this by my 10,000 summer peak estimate, you get to around 13%. And this happens to line up with what seems to be the city’s generally accepted winter cycling retention ratio.

    Not surprisingly, fewer people want to cycle in the winter. But the number is not nothing. If you multiple 1,292 cycling trips by 120 days (roughly December to March), that’s still over 150,000 trips (I know, I didn’t account for weekends). On top of this, the city’s winter cycling retention rate appears to be increasing.

    So just because you may not want to cycle to work in the winter, it doesn’t necessarily mean that others feel the same way.

  • Architecture billings are down

    When I was in grad school they used to always tell us that architects are a leading indicator for the development business. Because if architects are getting fewer jobs/billings, it means that at some point in the future there will be fewer construction starts and then fewer completions. And not surprisingly, that is what we are seeing happening right now. Below is the latest data from the AIA/Deltek Architecture Billings Index (via Bloomberg).

    Billings, inquiries (an even earlier leading indicator for billings), and design contracts are down:

    And it seems to be most pronounced in the West and the Northeast:

    This is always something to watch if you want to try and forecast where hard costs might be going and what completions might look like in the next few years.

  • Billionaire minimum tax

    If you’re looking for a rough overview of how US business income taxation works — and who isn’t really — this is an interesting article by Matt Levine. He has a knack for making this stuff a lot more interesting. The real purpose of the article, though, is as a lead up to talking about Biden’s proposed “billionaire minimum tax”. At the highest level, here’s the idea:

    His most recent budget would require taxpayers worth more than $100 million to pay a minimum of 25% on their capital gains each year, whether they sold assets for a profit or continue to hold them.

    The way things work today is that unrealized capital gains are not taxed. Meaning you can own something like a stock for a really long time and not pay any capital gains on it, until of course you sell or realize the gains. So this is a philosophical kind of change. And in Matt’s words, it is both “jarring” and “possibly unconstitutional”.

    But I guess it doesn’t affect that many people. There are, according to CNBC, somewhere around 10,660 centi-millionaires in the US. I wonder why it’s not called a centi-millionaire minimum tax, though. (I know why.)

  • Interest rates are expected to start coming down this summer

    Last week was “forum week” in Toronto. (That is, it was the Toronto Real Estate Forum.) And as is the case every year, Benjamin Tal, deputy chief economist of CIBC, opened up the event with his usual macro view of the world. For those of you who missed it (as I did), here are some of his key points (via RENX):

    • The Bank of Canada’s overnight rate will ultimately/likely settle into the 2.75-3% range (currently it sits at 5%). He expects rates to start coming down this summer.
    • Inflation is down, but we’re not yet at the 2% target. The “last mile” is always the toughest.
    • But as we know, the BofC will take a recession over high inflation, any day.
    • The mortgage market has fallen faster than in the early 90s recession. Tal said that the residential real estate market in Canada is right now facing “the biggest test” since then.
    • Canada is in what he calls a “per capita recession”. But for the million or so immigrants that the country accepted over the last year, we’d be in a full-blown official recession.
    • Finally, he called this correction in the housing market both “real” and “healthy”; he spoke about normalcy returning in 1-2 years; and he posited that the market will be “crazy” when it does return because of a supply deficit.

    This last point is an important one. New housing supply is mostly shut off right now. I say mostly because there are obviously still projects under construction, and there have been and there will continue to be some successful launches. But by and large, most developers are waiting right now, principally because the absorption isn’t there. They have no other choice.

    But Canada continues to grow. People from around the world continue to want to move here. And there continues to be a need for a lot more new housing. So when the market does return — and it, of course, will — there is going to be a supply-demand imbalance. And as is always the case in real estate, there will be a lag in responding to this imbalance.

    This is what Tal means by “crazy”.

    Photo by Wiktor Karkocha on Unsplash