Tag: real estate

• BARED: Howard Cohen, Context Development

  

  Howard Cohen was initially trained as an architect. But throughout his schooling he gradually became more interested in urban design and city planning. So after graduating in the late 1960’s from the University of Manitoba with a degree in architecture, he took a job within the planning department at the City of Winnipeg. There he helped to author the “Downtown Winnipeg Plan” and quickly earned the reputation as one of the most creative people in the department.
  

  But after about a year and a half on the job, he decided that he wanted a change in scenery and so he quit and took off to Europe with his wife. Upon returning, with no money to his name, he managed to strum up two potential job opportunities; both of which were, thankfully, not in Winnipeg. One was an architecture job in New York City and the other was a planning position for a neighborhood on the east side of downtown Toronto known as Trefann Court.

  Since planning had become more interesting to him than architecture, Howard decided to fly to Toronto for the job interview. He vividly remembers staying at the Sutton Place Hotel – which is today being converted to condos – and walking down Bay Street to City Hall for his interview. He also remembers being so nervous that he had to smoke a joint prior to, in order to calm his nerves. The interview was with the chief planner, deputy chief planner, and with local residents from the area. They offered him the job on the spot.

  He accepted the position in 1970 and stayed at the City of Toronto until 1978. Howard was contemporaneous to figures such as John Sewell – the former mayor of Toronto who was also heavily involved in Trefann Court. Howard features prominently in John’s book: “How We Changed Toronto – The inside story of twelve creative, tumultuous years in civic life, 1969-1980.”

  Interestingly enough, during his time at the City, some of the land use policies that Howard was championing were actually quite contentious within the development community. For instance, Howard believed that Toronto’s downtown residential neighborhoods – neighborhoods such as Cabbagetown – should be preserved, and not razed and turned into replicas of St. James Town. This is an outcome that I am sure most of us today now appreciate.

  However, this is not to say that he was anti-development. Howard also firmly believed that high-density residential should be encouraged throughout the core of the city. We take this for granted now, but he remembers being called a zealot at an Ontario Municipal Board hearing because of his belief that people may actually want to live at the corner of Bay Street and Dundas Street. This was supposed to be a place for working and shopping, but definitely not living.

  Towards the end of his tenure at the City, Howard had become for all intents and purposes the chief planner of Toronto. He was the guy. However, without the actual title he was starting to get restless and decided to look elsewhere for opportunities.

  In 1972, the federal government formed a new Crown corporation known as the Harbourfront Corporation. This was after having expropriated over 100 acres of derelict industrial land along Toronto’s waterfront. The mandate was to revitalize the central waterfront, but after failing for 5 years to make anything meaningful happen, responsibility was ultimately turned over to local leadership.

  Shortly thereafter, Howard left the City and became the first head of Harbourfront Corporation. As coincidence would have it, he was offered the position on the same day that David Crombie – who was mayor at the time – called him to formally offer him the role of chief planner. However, Howard felt that there were more exciting challenges at Harbourfront and so that’s where he went.

  One of his first tasks at Harbourfront was to write the business plan that would set the course for the corporation and allow it to become self-sustaining. The model became about leveraging the value of the corporation’s land to not only create a thriving mixed-use community, but to also create a set of cultural institutions along the waterfront.

  The legacy of Howard’s work can be found in the Power Plant Contemporary Art Gallery, the Harbourfront Centre outdoor skating rink, the Queen’s Quay streetcar, as well as a number of other initiatives ranging from cultural programs to development projects. Some of his development deals included the affordable housing built at Bathurst Quay, the Admiral Hotel, and the Queen’s Quay Terminal developed by Olympia & York – a pioneering mixed-use development that to this day serves as one of the most important anchors on Toronto’s waterfront. It was also through these development projects that Howard would increasingly get into the mindset of a developer – something that would obviously serve him well later on.

  Despite being a financial success, Harbourfront Corporation was ultimately disbanded, partly due to controversy over some of the high-rise towers being developed along the waterfront. At this point, Howard was 44 years old and had spent his entire working career in the public sector. With the experience he had gained at the City and at Harbourfront Corporation, he decided that it was time to move over to the private sector and make some money. He went to work for a developer.

  Howard landed at Murray Goldman’s development company – the Goldman Group – and would spend 4 years there as President. He didn’t necessarily have all the finance and marketing chops, but he did have a lot of other relevant experience. Perhaps his best known project of this era is the Castle Hill townhouse complex at the foot of Casa Loma.

  After stepping down from the Goldman Group in the early 90’s, Howard then turned to consulting. This was a period of time when many in the industry were licking their wounds, but Howard managed to amass a diverse set of clients, including Innis College at the University of Toronto and the nascent Design Exchange. Initially hired as a consultant in 1992, Howard would later get asked to head up in the Design Exchange in 1994. He would spend 2 years in this role and raise over $7 million in donor money during one of the worst recessions in recent history.

  As his consulting business chugged along, Howard would later reconnect with an architect by the name of Lloyd Alter. Lloyd had done some work for the Goldman Group when Howard was there and they decided to join forces and create a larger consulting business known as Cohen & Alter. Business was good for the two of them. They were busy.

  They hadn’t really planned on getting into the development business, but then one day an agent came knocking with a small piece of land on Niagara Street. It was located in today’s King West neighborhood. Barbara Hall was mayor at the time and the city was starting to talk about new policies to open up “The Kings” to revitalization. “The Kings” being the two shoulders of downtown Toronto: King Street West and King Street East.

  Toronto was still in a recession at the time and nobody wanted the site. It was also fairly non-consensus to think that people would want to live in these gritty old parts of downtown. Only zealots believed this to be true. So the agent told Howard and Lloyd that they could option the site for $1 – basically tie it up for free.

  This was the birth of 20 Niagara.

  Since the recession had also left architects without work, they managed to get Peter Clewes (today of architectsAlliance) to defer his fees on the project. The deal was that when the project got off the ground, everyone would get paid. It was the ultimate in bootstrapping.

  Around this same time, Howard and Lloyd met Tom Schwartz, who would become a kind of mentor and advisor to the aspiring developers. Tom, who today is the President and CEO of CAPREIT, was already a successful developer through the founding of Intraurban Projects in 1976.

  Tom introduced Howard and Lloyd to a company called Equivest, which was owned by Gerry Schwartz (of Onex fame) and Stephen Gross. Equivest would become the financial backer for their fledgling project and set the stage for a go-forward funding model.

  Howard and Lloyd would also turn to a guy named Brad Lamb to sell the project. Brad had just started his own brokerage after working under Harry Stinson – a real estate broker turned developer who is perhaps best known for his cheesy late night infomercials. Brad had two employees at the time and would go on to personally sell 20 Niagara Street.

  20 Niagara launched in 1996.

  The project contained 30 condo units and was about 40,000 square feet. It took a year to sell the first 20 units – at some absurdly low price – and ultimately didn’t make any money for both Howard and Lloyd. Howard would spend the next two projects paying back the hangovers from 20 Niagara. It did, however, give birth to Context Development.

  Howard and Lloyd ended up parting ways after 20 Niagara, but the partnership of Howard Cohen, Stephen Gross, and Peter Clewes would go on to build some of the most design-forward and contextually sensitive projects in the city. The core philosophical beliefs were that housing of every varietal belongs downtown and that modern architecture has a place in the mass market. Again these principles may seem obvious today, but they weren’t as obvious in the late 90’s.

  Context Development would later develop adaptive reuse projects such as the Kensington Market Lofts and the Tip Top Lofts, award winning projects such as the Mozo, and wildly innovative projects such as the District Lofts (pictured above). This 14-storey “twin tower” condominium used Le Corbusier’s “skip-stop” system to create two-storey through units. Context would also go on to develop two buildings that I have personally called home – one of which I am sitting in right now as I write this post.

  For me, the story of Context has always had a particular resonance. As a trained architect who then entered the development business, Howard’s story showed me that I too could leave the world of architecture and do something positive for cities. He was a significant inspiration for me early on in my career when I was figuring out which path I wanted to take.

  Every developer brings their own background and sensibilities to their projects. And in the case of Howard’s projects, I know that Toronto is a better city because of it. Thank you, Howard.

  Image: District Lofts via Context

  ———————————————————

  This is the third post in my blog series called BARED (Becoming A Real Estate Developer). If you’d like to be featured in this series, send me an email or tweet me. The links are at the top of this page. Also, email subscribe to this blog to stay in the loop.

  2016.12.13

• One becomes four

  The New York Times posted an interesting article today talking about how roommates in the city are dividing and conquering expensive rentals using temporary walls. This is obviously not a new practice. But it’s a good case study in what people will do in order to make living in a specific location affordable – in this case, Manhattan.

  The first example is a one bedroom apartment that was converted to a 4-person apartment. Here is the floor plan (from the New York Times):

  

  The living/dining room was divided up using a T-shaped partition wall – which is required to stop 2 feet shy of the ceiling – to create two additional bedrooms. The original bedroom is then shared via two twin beds. Et voilà. Now you have an apartment where the $3,750 per month rent becomes less than $1,000 per person.

  Probably the most annoying thing about this setup would be the lack of acoustic privacy. Since the partition walls don’t go all the way up to the ceiling (photo here), you’d obviously hear everything. One person in the article described it as living in the same room as all of your roommates, but not being able to see anyone.

  Of course, there’s also a space consideration:

  Mr. Meyer, 23, has the smallest room by far. “It kind of feels like you’re living in Harry Potter’s cupboard,” said Mr. Meyer, who is in his freshman year at Columbia after serving for three years in the Israel Defense Forces.

  The roommates, three of whom grew up together in Toronto, don’t mind the close quarters or the lack of privacy. “It’s definitely not for everyone,” Mr. Meyer said. “When you live with your best friends, it couldn’t be better. We hardly spend time in our rooms.”

  I saw a lot of this here in Toronto while I was in undergrad. 55 Charles Street West was always a great candidate for these sorts of hacks because the units are large and because the building is filled with solariums. Inevitably, they became additional bedrooms. 

  (Sidebar: My understanding is that there was a period of time in Toronto where solariums were excluded from gross floor area calculations. So developers used to always put them in to capture more area. That’s why buildings of a certain vintage always seem to have them.)

  In any event, the above certainly makes the case for more micro units and co-living arranagements. Many people seem willing to deal with a variety of living situations in order to live where they want to live. Urban affordability is certainly a global concern.

  2016.12.09

• Opendoor.com is so risky that it may just work

  

  I have been writing about the startup Opendoor.com for over 2 years now. And I continue to believe that they are the most promising disruptor in the residential real estate space. 

  Here is the first post that I wrote back in July 2014 after they raised their first round of funding. Here is the second post that I wrote after they launched in Phoenix. And here is another post that I wrote 6 months ago where I argued, once again, that they are doing something worth paying attention to. (This last post explains how the platform works.)

  Well, about a week ago it was announced that they have raised another round of funding: a $210 million Series D. In all likelihood, the company’s valuation is now over $1 billion. Here’s the Techcrunch announcement where the message was: huge ass number; risky business model.

  In response to this, Ben Thompson wrote a terrific and widely shared blog post called, Opendoor: A Startup Worth Emulating. I love his post because he says what I have firmly believed and argued for many years: Zillow and Redfin are not disruptive real estate startups.

  This is what he says about Zillow:

  “And yet, the most successful real estate startup, Zillow (which acquired its largest competitor Trulia a couple of years ago), is little more than a glorified marketing tool: the company makes most of its revenue by getting real estate agents — the ones collecting 6% of fees, split between the buying and selling agents — to pay to advertise their houses on the site. Certainly a free tool that makes it easier to find houses in a more intuitive way is valuable — Zillow has acquired the sort of userbase that allow it to build an advertising business for a reason — but at the end of the day the company is a tax on a system that hasn’t really changed in decades.”

  And though very risky, he argues that Opendoor is far better positioned to shake up the status quo. 

  Here are two of his key points:

  “Sellers are uniquely disadvantaged under the current system, which is another way of saying they are an underserved market with unmet needs.” [Sellers are the side of the market that Opendoor is specifically targeting.]

  “Opendoor has a new business model: taking advantage of a theoretical arbitrage opportunity (earning fees on houses sold at a slight mark-up) by leveraging technology in pursuit of previously impossible scale that should, in theory, ameliorate risk.”

  And here’s what that could ultimately mean for the industry:

  “Opendoor has many more reasons why it might fail than Zillow or Redfin, but its potential upside is far greater as a result. First is the immediate opportunity: sellers who can’t wait. However, as Opendoor grows its seller base, especially geographically, its risk will start to decrease thanks to diversification and sheer size; that will allow it to lower its “market risk” charge which will lead to more sellers. More sellers means both less risk and an increasingly compelling product for buyers to access, first with a real estate agent and eventually directly. More buyers will mean lower marketing costs and faster sell-through, which will lower risk further and thus lower prices, pushing the cycle forward. It’s even possible to envision a future where Opendoor actually does uproot the anachronistic real estate agent system that is a relic of the pre-Internet era, and they will have done so with realtors not only not fighting them but, on the buying side, helping them.”

  I’m with Ben on this.

  2016.12.08

• Below-grade urbanism

  I came across an interesting discussion on Twitter last night about tunnels, bridges, elevated walkways, and Toronto’s elaborate (mostly) underground shopping complex known as the PATH. It’s the largest of its kind in the world.

  Here’s the thing: the idea of pulling people off the street and into an underground shopping mall, runs counter to what many urbanists believe is the optimal outcome.

  Below is a footnote I found in a 2006 research paper by Pierre

  Bélanger called, Underground landscape: The urbanism and infrastructure of Toronto’s downtown pedestrian network.

  “The reluctance of urban designers and academics to engage the
  dynamics of the underground is stunning. For almost 50 years, urban
  designers, landscape architects and planners have longed for car-free
  pedestrian environments that are safe, secure and accessible. From a
  planning perspective, the Toronto underground may be the ultimate form
  of attrition of the automobile on the urban landscape: there are no parking
  lots, no asphalt, and no congestion. With its mass-transit accessibility, it is
  an ideal pedestrian network. This reluctance may in part be attributable to
  a prevailing attitude that privately-controlled underground shopping is
  undesirable, at best dismissible. As self-contained environments, they are
  perceived as lying outside the so-called public domain and that they kill off
  street life. As a more legitimate form of collective space, street-level
  activity located within municipal right-of-ways therefore receives much
  more advocacy.”

  Of course, there is truth to the notion that activity gets concentrated below grade. When people visit Toronto’s Financial District for the first time, they’ll often ask: Where is the retail? And then you have to explain that it’s all underground and that we live like mole people from 9-5.

  But despite this reluctance on the part of urbanists, people do seem to like it. When you’re marketing a building in the CBD, being PATH-connected is a feature, not a bug. I always joke that in the summer, I hate the PATH. But in the winter, I love it. 

  There’s also a feeling of hyper-connectivity during business hours in the PATH – particularly at lunch. You have everyone leaving their desks, descending from their towers, and mixing all about in a dense pedestrian-only network. It’s unusual not to run into someone you know.

  So love it or hate it, perhaps we should appreciate it for what it is: thriving city life.

  2016.12.01

• Flood-prone areas see dip in real estate sales

  

  The New York Times has an interesting article up talking about the possible impacts of climate change on coastal real estate in the United States. In it they make the argument that sales velocity is declining in flood-prone areas. Here are two snippets:

  Over the past five years, home sales in flood-prone areas grew about 25 percent less quickly than in counties that do not typically flood, according to county-by-county data from Attom Data Solutions, the parent company of RealtyTrac. Many coastal residents are rethinking their investments and heading for safer ground.
  

  In the past year, home sales have increased 2.6 percent nationally, but have dropped about 7.6 percent in high-risk flood zones in Miami-Dade County, according to housing data. Many coastal cities are taking steps toward mitigation, digging runoff tunnels, elevating roads and building detention ponds.

  I would like to see more data supporting this argument, but I can’t say I’m surprised. Flood risk is certainly something I would think about – particularly in high-risk areas such as South Florida. Florida has 6 of the 10 most vulnerable urban centers in the US.

  The other piece that caught my attention is this:

  Flood risks are easily overlooked because past flood damage often goes unreported and, as in Virginia, the burden of discovering it falls to the buyer. LexisNexis, a news and legal research company, can supply sellers a report with the history of flood claims on the property, but buyers usually do not know to ask for it. FEMA collects information on federal insurance claims for homes nationally, but the agency has been reluctant to make it public for privacy reasons.

  It is yet another example of how opaque the real estate industry is. A lot of the information – assuming it’s even available – is fragmented across a number of different sources. If you’re playing hot potato, this obviously works to your benefit. But I don’t believe it’s the best thing for the overall market.

  2016.11.28

• What could a connected lockbox mean for the residential real estate business?

  

  I just discovered an interesting Dallas-based startup this morning called TOOR. They were on Shark Tank and haven’t yet launched their product, but it’s essentially a connected lockbox. Lockboxes are a mainstay of the residential real estate industry (they hold the keys so that co-operating agents can show a property) and they are becoming even more common nowadays because of Airbnb rentals.

  What caught my attention about TOOR is the app that goes along with the lockbox that also allows people to search for homes. Once you’ve found a home you can even find an agent for an escorted tour. I’m not clear on the exact workflow, but I am thinking that if you buy this connected lockbox you then have the opportunity to put your home up for sale on their platform.

  This is interesting because the app will also verify user identities and scan people’s IDs, so it helps to solve the security problem that agents today now solve. I could imagine the app storing my credit card so that if I go into a home unescorted and I do something mischievous, it then charges me. It also makes it really easy to just drive around and pop into homes by instantly scheduling appointments.

  In any event, I may have the exact user flows a bit wrong, but it’s fascinating to think about how something as simple as a connected lockbox could start to chip away at the status quo.

  2016.11.19

• Crazy home prices

  

  This afternoon I walked the High Line with a friend of mine who seemed to know everything there is to know about new residential development in Manhattan. 

  She recently purchased a place and so she had done her homework. She was pointing out every building and telling me the price per square foot range; whether the floor plans were well designed (or if they had misproportioned rooms and awkwardly placed columns); and who the architect was. 

  Takeaway: To be competitive in the luxury segment in New York, you really need to have a name brand architect on the project. That seems to be the price of entry.

  As she was telling me about the “competitively priced” building in the low $2,000′s psf and the expensive penthouse that recently sold for $7,000+ psf, I started to wonder about historical pricing in New York. How has it trended? 

  I also told her that you could buy a really great condo in Toronto for $700 psf. She laughed at how affordable that was. It’s all about your point of reference.

  In any case, I found a research report from 2004 called: Why is Manhattan So Expensive? The story is one that you’ve heard before. It’s about the impact of land use restrictions on home prices. But it does also include some historical data on average condo prices.

  In 1984, the median price per square for a condo in Manhattan was $359 psf. It peaked in 1987 at $505 psf and then dropped back down to the $300′s in the early 90′s. That was not a great time for real estate. However, by 2002, the median price had rebounded to $606 psf. All USD figures.

  From 2002 onwards, Manhattan saw a dramatic increase in home prices. Below are two charts from Corcoran (Q3 2016 data) and Castle Avenue, respectively:

  

  Toronto is obviously not New York, but’s interesting to consider that the average price of a downtown Toronto condo, today, is probably in the low $600′s psf. That’s in Canadian dollars and that’s pricing that New York saw decades ago. 

  It reminds me that “crazy pricing” can oftentimes be a psychological reaction to a pricing anchor that we previously set in our minds. It feels crazy. But is it?

  Image: Me

  2016.11.06

• Pause button

  Councillor Kristyn Wong-Tam recently put forward a request for a report on the implementation of a 1-year moratorium (let’s ”hit the pause button”) on new tall building rezoning applications in the downtown core of Toronto. You can read the full letter here.

  Not surprisingly, the building industry doesn’t like this.

  But besides that obvious point, I did want to draw attention to the following comment made by Quadrangle Architects partner, Richard Witt (taken from this BuzzBuzzNews article):

  “The city has, for years, used the development charges that should have been used to upgrade infrastructure to artificially lower property taxes by putting the development charges into general revenue,” he says.

  The intent of development charges is that they fund the infrastructure required as a result of new development – everything from transit to water. In the US, they are (I think) more commonly called impact fees. In this case the name makes the intent quite clear.

  I am curious to what extent we are relying on development growth to fund the status quo. Because growth may not always be there. History has shown us that.

  2016.11.04

• Total work of art

  

  I toured 56 Leonard Street in New York today. The only picture I have on my phone is the above photo of the lobby. The rest of the photos are on my Fuji and so they’ll make their way to my Instagram over the coming days. 

  There’s lots that has already been said about the architecture of 56 Leonard, but one thing I wanted to point out was this idea of a “total work of art.” The German word for this: Gesamtkunstwerk. I’ve written about this before, here.

  With many/most development projects, there will be a separate architect and a separate interiors firm. There’s absolutely nothing wrong with this approach, but it could lead to a disconnect between the exterior and interior. Or at least, some architects will tell you that.

  In the case of 56 Leonard, the architect (Herzog & de Meuron) also designed all of the interiors – right down to the kitchens, the sinks and tubs, the light fixtures, and likely a few other things. Hence the “total work of art.”

  It’s incredible to see what happens when you have one design sensibility brought to an entire project. 56 Leonard is beautiful. For the rest of the photos, make sure to follow me on Instagram.

  In case you’re wondering, the condo prices in the building run between $3,500 and $5,000 psf. One of the penthouses recently sold for USD$47 million.

  2016.11.04

• The yellowbelt

  We talk a lot about the greenbelt here in Toronto. Some argue that it’s squeezing the housing market and driving up prices.

  But what about the yellowbelt? (Credit to Gil Meslin for the term.)

  Here is a land use map of Toronto:

  

  The yellow areas are “neighborhoods.” They, along with parks, ravines, watercourses, and valleys, make up ¾ of the city’s land area. The Official Plan describes these areas as being “stable” – meaning they will see little physical change. Supply cannot adjust to demand.

  I get why this is the way it is and I understand how difficult it would be change something like this. But let’s not ignore the impact that this land use constraint has and will continue to have on the housing market. 

  It’s the yellowbelt. Thank you Gil for letting me to steal the name.

  2016.11.01