Tag: development

• 3 architects operating as developers

  

  A reader recently shared with me an interesting article from Crain’s New York (2013) profiling three “architects as developers.” The three firms are DDG Partners (which I’ve mentioned before here on ATC), FLAnk, and Alloy.

  I’ve written a lot about these emerging business models and I continue to think that we’re going to see more of them in the coming years.  As evidence for that claim, I thought it was really interesting to read in the article that Vishaan Chakrabarti – who is director of the real estate program at Columbia University – made specific mention that there’s growing interest among his students to wear multiple hats. In other words, they don’t want to be just an architect or just a developer. They want do it all.

  In a lot of cases, these firms are made up of partners who have those diverse skill sets. There’s only so much that one person can do. But that doesn’t negate the fact that vertically integrated companies are being formed that handle everything from design and construction to property management and development.

  And if an increasing number of students today are interested and thinking about those models, then I think it’s a pretty safe bet that many of them will get out into the workforce and eventually create those companies in the future.

  Ultimately, I think that’s a great thing for cities. Developers tend to have a bad reputation for thinking only about money. But when you bring design and other disciplines in-house, you create tensions in the process. And tension can be a great thing for innovation and creativity.

  Image: 385 West 12th by Flank

  2015.03.11

• What you should study to become a real estate developer

  One of the most common questions I receive from readers is about what to study in school in order to become a real estate developer. Here’s one of those questions:

  “Thank you so much for your insight into the real estate development process! I was wondering if you could do a post on what educational degrees you think would best prepare someone for a career in real estate development?”

  I’m not surprised that a lot of aspiring real estate developers have this question on their mind. Compared to many other career options, the path to real estate development has traditionally been pretty informal. It’s much less structured compared to other professions such as law or medicine.

  But as the real estate industry continues to institutionalize (transition from rich families to institutions), I’m sure we’ll see recruitment become more structured as well.

  Already the MBA and Master in Real Estate Development (or some other permutation of that degree) have become — for many large real estate organizations — the prerequisite to getting in the door. So if you’re looking for a simple and safe answer, just get one of these degrees.

  To more fully answer this question though, I thought I would just share my own strategy for getting into real estate development. Because at the end of the day, there’s no one way to become a developer. Lots of people start out in other industries, only to fall into real estate later on.

  The way I started was by first identifying the skills that I thought I would need as a real estate developer and that I felt employers would be looking for. And I assembled this list by going on lots of informational coffee meetings with developers to make sure I was headed in the right direction with my assumptions. 

  In the end, this is more or less what I decided I needed to know:

  Planning: An understanding of local planning policies, zoning, and so on. For this one, it’ll help if you can pick a particular place and commit to learning it (which is what I did with Toronto). There are a lot of local particularities that you’ll need to grasp. Real estate is very much a local business.

  Finance & Economics: The ability to understand markets, build models, and crunch numbers just like a banker. That was my goal before I got an MBA. This includes discounted cash flow analyses, net present value calculations, internal rates of return, and so on.

  Sales & Leasing: There are a lot of people who think that this is the best way to start in real estate (particularly on the commercial side). Learn the nitty gritty of leases and deal negotiations and then figure out where you want to be in real estate. Because at the end of the day, development projects are only viable when you have sales and/or signed leases in place.

  Design & Construction: This was the easy one for me because I was coming from an architecture background. I could “read plans” and I didn’t need to convince people that I understood how buildings worked and how they were built. Instead, I needed to convince people that I had all the other skills.

  And I knew this because that was the feedback I received my informational coffee meetings while I was in architecture school. One CEO (of a large publicly traded REIT in the US) told me flat out: “I need to feel comfortable that you can negotiate and that you won’t fuck up the numbers.”

  And that stuck with me. I realized that I had an image to shed.

  To round out my skill set, I decided to specialize in real estate in my first masters and then get an MBA. And given the chance, I would do it the same all over again. But even if you don’t have the opportunity or inclination to do that, there are a lot of other things you can do to shore up your knowledge base.

  I took a number of ARGUS and Excel classes to learn how to build robust real estate models. You might be surprised at how much you end up learning about the real estate business by doing that. I also became involved in organizations like the Urban Land Institute and started going to every real estate panel I could find. And before committing to doing an MBA, I even thought about taking some accounting classes at a local College.

  So my point is that I think you should identify the skills and strengths that you have today and then figure out some way to acquire the missing ones. Go buy a real estate textbook. Take an online class. Go to industry events. Do whatever it takes to round out your skill set so that you can sit in front a prospective employer (developer) and tell them that you’re able to create value for them and their organization across every facet of the development process. That was my goal when I was trying to get in.

  Of course, those aren’t your only options. 

  You could also just work your way up by taking any job with a real estate developer. One of my closest friends did exactly that and today is doing incredibly well with no formal training in real estate or even a related field. You could also just go out and buy your first property and have a go at it. Many great fortunes have been created by doing exactly that.

  Either way, real estate development is an exciting business to be in. It can often be hard to get your foot in the door given the size of most development teams, but if it’s truly what you want to do and you work on acquiring the skills, I think you’ll eventually find your path.

  2015.03.11

• A cold ski town is building one of the first vertical farms in the world

  

  I have a soft spot for Jackson Hole, Wyoming. It’s a beautiful town and, out of all the places I’ve snowboarded, it’s easily my favorite.

  That’s why I was excited to learn that Jackson is currently building one of the first vertical farms in the world (and in a cold ski town at that). Using a vacant site in the middle of town, a new venture called Vertical Harvest is building a three storey, 13,500 square foot hydroponic greenhouse. It’s being done as a public/private partnership.

  

  The business will operate year round and supply fresh produce to the local community – replacing food that was previously being shipped in from Mexico and California. 

  The site itself is 1/10 of an acre, but it’s expected to have the same output as a 5 acre piece of land using conventional agriculture methods. 95% of their product is already committed through pre-purchase agreements. 

  Here are some of the businesses that have jumped onboard:

  • Rendezvous Bistro
  • Il Villaggio Osteria
  • Q Roadhouse
  • The Kitchen
  • Jackson Hole Mountain Resort’s five restaurants
  • Snake River Brewery
  • St. John’s Medical Center’s Refuge Grill

  What makes this project even more exciting is their commitment to employing members of the local community with disabilities. This is apparently a growing concern in Jackson, and so Vertical Harvest will be doing their part to address that.

  If you’d like to learn about the design of the facility, check out this article by Fast Company. The team was was very methodical in ensuring that this facility would consume less energy than the status quo of shipping in food from out of state.

  The go-live date is this fall (2015). I should probably plan another trip to Jackson.

  Images from Vertical Harvest

  2015.02.28

• What will the condo market look like in 10-20 years?

  Over the past week I’ve had 2 separate people ask me my thoughts on the future of the condo market in Toronto. One of them was working on a University study and one of them was trying to figure out what (condo) property managers would look like in the future. 

  To be clear, the questions weren’t motivated by the typical “bubble” debate that the media loves to headline, rather these were questions about the long term future of condos in this city.

  I haven’t written about this topic explicitly, so today I thought I would summarize my responses for the Architect This City community. There’s probably a touch of aspiration in the responses I gave, but it’s more or less what I’m thinking and what I believe has a good chance of happening over the next 10-20 years.

  Here are some of my thoughts (not an exhaustive list):

  Intensification is going to continue in Toronto and that is going to mean more condominiums and other types of multi-family dwellings. Rental apartments is the product type du jour right now within the real estate community.

  As intensification continues, I think we’re going to see a tipping point in the near term with more families opting to have and raise children in condos in the city. Part of this will be driven by a desire to stay in the city (walkable communities), but part of it will also be driven by the economics (i.e. high price) of low-rise housing in the city.

  As families begin to fill in condos (not just young single professionals and empty nesters), we’ll see developers and cities respond with more family friendly buildings, amenities, and program choices. This could mean anything from children’s play spaces within buildings to redesigned public spaces and parks.

  In line with this shift, I think we’ll also see more sophisticated executions of “mixed-use.” Rather than just stacked uses (retail at the bottom, a few levels of office, and a residential condo tower above), developers and operators are going to start thinking about the ecosystem they are creating. (Related discussion in the comment section of this post.)

  It’s probably a bit safe to predict that sustainability will become more important going forward. But I think that as more families and long-term end users opt for condos, that consumers will become more interested in building and energy performance. Technological advancement (both hardware and software) will also give this a boost.

  Finally, and this applies somewhat to real estate in general, I believe that we’ll see a lot more openness and transparency all across the industry. There will be much better access to data and information. Similar to above, this will be aided by advances in technology and networks.

  Now it’s your turn. What do you think of the above list? And what will the condo market — either in Toronto or in your city — look like in 10-20 years?

  2015.02.27

• The great intensification debate–what’s better for cities?

  

  San Francisco Bay Blues by Stefano Termanini on 500px

  I recently stumbled upon a great Treehugger article by Lloyd Alter called: The real triumph of the city will be seen in Buffalo (2014). The post is partially a response to economist Ed Glaeser’s popular book, Triumph of the City, which I’ve mentioned and cited many times before here on ATC.

  Lloyd’s thesis is basically that Ed is wrong in arguing that reducing the barriers to building is the most effective way to maintain housing affordability; that cities are really made out of flesh, rather than bricks and mortar; and that urbanists need to move beyond the view that a city’s past should be preserved at all costs.

  Lloyd then goes on to argue that rather than continuing to over-intensify cities like New York, San Francisco, and Toronto, we should be turning our attention to former powerhouses like Buffalo and trying to figure out how to reinvigorate those cities. The bones are already in place.

  Now, I don’t disagree that there’s lots of potential in cities such as a Buffalo and Detroit. I’ve written a lot about Detroit and I’m genuinely rooting for the city. But I don’t think it’s as simple as it sounds to shift our attention, and I don’t agree with all of the critiques of Glaeser’s work.

  As important as built form is, cities like Buffalo and Detroit remind us that architecture and buildings alone aren’t enough to build a city. There are countless masterpieces – such as Michigan Central Station in Detroit – that regrettably sit abandoned. You need people and communities.

  There’s also a snowball effect. 

  As a city becomes more successful, there’s a natural tendency for more people to want to be there. It’s no different than the network effect experienced by a social network. A social network without people has no value. But the more people you add to it, the more valuable it becomes and the more difficult it becomes to replace.

  So it shouldn’t come as any surprise that people will put up with expensive real estate and small apartments just to live in cities like San Francisco. That’s where they want to be. And as long as the demand to live in those cities is increasing, I continue to believe that it makes sense to build more, not less, housing and to make it reasonably easy to do so.

  At the same time, I believe whole heartedly in heritage preservation. As a trained architect, there’s a strong possibility that I would shed an actual tear should a building with heritage value be torn down in my city or in any city in the world. 

  And that’s why when I was on CBC radio last week I said that neighborhood investment needs to be a balance between preservation and progress. The Twittersphere later blasted me for using the term “progress”, but I think you get my position.

  My interpretation of Glaeser’s work has never been that he supports completely erasing a city’s past in order to make way for the future. If that is his position, then I too disagree with it. 

  My interpretation has instead been that he supports removing unreasonable barriers to development so that cities are able to supply – or can at least try to supply – enough housing to meet growing demand. This also doesn’t exclusively mean high-rise intensification. It could mean removing the barriers in front of things like laneway housing. And I continue to believe that this is a good idea.

  I don’t believe that this approach alone will solve all housing problems, but I do think it’s a great place to start.

  Thank you Lloyd for the great post.

  2015.02.24

• Thoughts on urban renewal and Geary Avenue

  

  dupont survivor by Josemaria de Churtichaga on 500px

  I was on CBC radio this morning talking about the revitalization of Dovercourt Village and Geary Avenue in Toronto. 

  The funny thing about this topic is that it’s one I actually held off writing about. I’ve been thinking about this street and area for probably about 5 years now. However, I do have to keep some secrets to myself 🙂

  But then I started feeling like the cat was already out of the bag. Everyone in my circle was talking about it. So I wrote a post calling Dovercourt Village the next Ossington. I had no idea it would get the traction that it has gotten, but in hindsight it makes total sense. It makes a great headline: “Toronto’s ugliest street to become the next Ossington.” Boom.

  The tough question that Matt Galloway asked me this morning was: What happens to all the blue collar businesses when/if Geary Avenue and the area really takes off? My response – given that it was only a 5 minute radio piece – was that it comes down to preservation vs. progress. 

  This is a topic that I’ve written about with respect to heritage buildings, but the same concept applies to communities as well. How do you allow neighborhoods to receive new investment while at the same time not erasing its past and the things that made it interesting in the first place?

  It’s not easy, that’s for sure.

  I absolutely believe that there are things that developers can do to respect the neighborhoods in which they build in. But at the same time there are economics at play. In business school, they teach you this:

  

  It’s the lifecycle of businesses and industries. 

  The key takeaway here is that the rise and decline of businesses is actually quite healthy for markets. History is littered with examples. The word processor replaced the typewriter. The mobile phone replaced the landline. Air travel replaced rail travel. And the list goes on.

  Today, I think we’re at a moment in time where our relationship to cars is changing dramatically. How we get around and how we own and operate them is being called into question. 

  So just because there’s auto shops on Geary Avenue today, doesn’t mean they’ll be there tomorrow regardless of whether the area takes off or not.

  2015.02.17

• Nominate your laneway for transformation

  

  Some of you might be aware that I’m involved with a non-profit group here in Toronto called The Laneway Project. 

  Our mission is to transform the city’s under-utilized laneways into safe, vibrant, and people-friendly spaces – which is something that has been done with a lot of success in other parts of the world (see Melbourne above).

  Today I’m excited to announce two things.

  First, the group has received funding from the Ontario Trillium Foundation. This is great news because it’s obviously a lot easier to execute on a mission when you have some resources behind you.

  And that ties into the second announcement. 

  The funding received from the OTF is going to be used for 2 laneway transformation projects here in Toronto. Think of them as pilot projects that will help to reorient Torontonians into thinking about laneways as viable public spaces and to demonstrate that this group is about real action.

  Once the 2 laneways have been chosen, The Laneway Project will work with those local communities to come up with a vision and then an implementation plan. But before that can happen, there needs to be 2 laneways.

  So if you’re a community group, resident association, business improvement area, or some other passionate group, now is your chance to nominate your laneway. Get in touch with The Laneway Project before February 7th, 2015 by clicking here.

  Image: Melbourne Laneway via Flickr

  2015.01.31

• Our fixation with height

  

  Last summer a development application was submitted for a 57 storey mixed-use tower on the south end of Toronto’s historic Distillery District. 

  It’s the tower on the right hand side of the picture above. The 2 towers on the left are existing, although they’re quite recent. The development site is currently a parking lot and it abuts a railway corridor to the south.

  The reason I bring up this project now is because I recently saw this notice go out from the Gooderham & Worts Neighbourhood Association. It’s an announcement for a public meeting that I believe just happened earlier this week (I think they meant to say 2015 instead of 2014).

  After I saw the notice, I decided to share the rendering on social media to see what people thought of the proposal. The general consensus seemed to be that the tower looked a bit cookie cutter (though to be fair it’s hard to tell from renderings like this) and that 57 storeys was simply too tall for the area. I got comments back like “enough is enough.”

  Now, I’m not here to say that 57 storeys is exactly the right height for this building and this location (though it might be), but I am saying that I don’t think it’s as important as most people think it is. I think we’ve become over-fixated on height, at the expense of other important design issues.

  Part of this has to do with how we communicate projects and how we tell the story. If you look at the city’s website for this project, you’ll see that this is how it’s explained:

  The City has received an Official Plan Amendment and Rezoning application for a 57-storey mixed use tower and a 5-storey commercial building containing 496 residential dwellings, 5,048 square metres of retail gross floor area, and 21,243 square metres of office gross floor area. The 5-storey commercial building is within the Distillery District, and the 57 storey tower is immediately south west of the Distillery District.

  About the only thing that I think most people (outside of the industry) would understand are the heights of the buildings. Everything else – from the Official Plan Amendment to the number of square metres of gross retail area – is likely lost. 

  So it’s actually not surprising that most people just look at one or two renderings and the number of storeys, and then make a judgement call about whether or not it would be a positive thing for the city.

  Now, I know why we communicate projects in such a clinical way. It’s to appear impartial. But there are so many other considerations when it comes to great city building. 

  How does the building meet the street? What are the first couple of floors like at eye-level? What’s the materiality? What would the experience be like for someone having a coffee on a patio outside of the building? What kind of commercial tenants will there be? Is there a unique leasing/programming strategy? What’s the overall vision for the project?

  Again, I’m not saying that height is completely irrelevant. I simply fear that we might be losing sight of the bigger picture. The Distillery District is a magical place in Toronto. It’s hands down one of my favorite places to be. In fact, I’ll be there this weekend for a Winterlicious dinner. But I honestly couldn’t tell you how tall the existing towers are. Are they in the 40s? 

  I could, however, tell you exactly what it’s like to walk down the Distillery’s intimate cobblestone streets and sit on a patio with a beer in hand. It’s a beautiful thing.

  Note: I have zero affiliation with this project.

  Image: City of Toronto

  2015.01.30

• An example of low-rise intensification: Union Street EcoHeritage

  

  In yesterday’s post about the 3 stages of intensification, I mentioned a project in Vancouver called Union Street EcoHeritage by SHAPE Architecture. I used it as an example for sensitive low-rise intensification.

  Since it’s a very cool project (and most of you probably didn’t click through), I thought I would dedicate today’s post to explaining the project.

  The picture at the top of this post is what it looks like today (the front elevation). If you were to pass by it, I suspect most of you would just think it was a pair of renovated single family homes. But there’s much more to it. What started out as only 2 dwellings, ended up as a site for 7 dwellings.

  Here’s the before shot:

  

  The homes were moved and actually raised up in order to accommodate additional density. Here’s a section that better explains what was done (black is existing; green is new):

  

  The 2 existing homes were raised up so that an additional dwelling unit could be placed beneath each one. At the same time, additional units were added in the rear, both attached to the existing homes and at the back of the site facing the laneway. And so this project is actually one part laneway house.

  Here’s a photo of what that rear interior space looks like (it’s stunning):

  

  Not surprisingly, this project won a bunch of awards and has been widely celebrated as an affordable housing solution. It’s exciting to see Vancouver take the lead on low-rise intensification. It’s one of the reasons that I think it’s only a matter of time before Toronto starts to look towards similar solutions.

  Images: SHAPE Architecture Inc.

  2015.01.28

• More on the real estate development process

  

  A few weeks ago I received the following comment from a reader:

  Really enjoyed reading this post about being a real estate developer. I was just wondering if you could do a write up on the various jobs and functions in a typical real estate development company so that people like me, who intend to work for a developer can roughly know what kind of skills are required or demanded in order to work there.

  It’s a great question and so I will try and answer it today. The first thing I should say though is that real estate developers are typically very lean on people. I’ve worked for big publicly traded real estate companies and small boutique ones, and the development teams are always fairly small.

  It’s that way because development projects can be messy and intermittent. The industry itself is also prone to regular market cycles and so the strategy is generally to remain fairly lean and outsource a lot of the work. You ramp up consultants and suppliers on a per project basis – as you need them.

  With that said, let’s talk about the typical development process and some of the key skill sets required. A simplified process might look like this:

  1. Buy development site (Acquisitions)
  2. Design a project (Consultant Coordination)
  3. Make sure project is feasible (Finance)
  4. Obtain approvals for said project (Planning & Approvals)
  5. Sell/lease space (Sales, Leasing & Marketing)
  6. Build project (Construction)
  7. Make money (The goal)

  Depending on the size of the firm, one person may be responsible for managing many if not all of these steps, or they may be split up into different departments. So you could end up with a department list like this:

  1. Acquisitions
  2. Development/Project Management
  3. Finance
  4. Sales, Leasing & Marketing
  5. Construction

  From my experience as a developer, you’re going to be involved in all aspects. And that’s part of what makes development so exciting. But let’s talk about some of the key areas:

  Planning & Approvals

  After tying up a winning development site, securing your approvals (commonly referred to as “entitlements” in the US) is usually the first major step. The reason this step exists is because oftentimes what you want or hope to build isn’t what you’re actually allowed to build as-of-right.

  So you have to go through a process to make that happen. It can take years depending on where you might be doing business, but there’s typically a significant amount of value creation at this stage. Some developers only focus on this stage and don’t actually build.

  City planning is a good background for this function. You need to understand the local planning policies and frameworks.

  Consultant Coordination

  As I mentioned before, development teams are often small. And that’s because all developers rely on outside consultants to make a project happen (architects, engineers, and so on). So a big part of being a strong developer is just being a strong project manager. The expression often thrown around the industry is that development is like herding cats.

  Having some sort of a technical background helps for this function. You end up dealing with a lot of technical details (which I find super interesting), and so it helps to have a bit of a background or an interest. If you’re not inclined in this way, you might find this area boring.

  Financial Modeling

  Building project pro formas and managing budgets is obviously a key component of the development process. From the moment you first look at a site up until project completion, you’ll be building financial models and constantly refining them as you get more information. The first version might be on the back of a napkin and the last version might be a complex Excel spreadsheet.

  Banking and finance is obviously a good background for this function. But you also need to understand the real estate business. Models are only as good as the information you feed it, so your assumptions have to be sound. 

  Sales, Leasing & Marketing

  I cannot over emphasize the importance of this function. If you are not selling units or leasing space, then you do not have a project. So no matter how amazing you might be at all the other functions (even fundraising from investors), if your firm is not bringing in money from your customers (purchasers or tenants), then you are dead.

  When I was at Penn, a lot of the real estate professors used to tell us that leasing is the best way to get started in the industry. And I don’t disagree with that – even though I didn’t start there. This is often handled by a separate department and/or outside team, but you’ll need to be intimately involved.

  Construction

  If you’re at this stage, that’s usually a good sign. It usually means you’ve managed to sell a bunch of units and/or lease a bunch of space. Some developers (with enough scale) will have a construction team in-house, but many others will just outsource it to a 3rd party. Regardless of the setup, it once again helps to have a technical background.

  If I missed anything or you want to add more detail, please let me know in the comment section below. I’m always happy to receive questions and post ideas, so feel free to tweet or email me. Tweets will almost always get a faster response.

  Image: Flickr

  2014.12.29