Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1063

The world is increasingly spiky. Inequality is growing and it is increasingly geographic in nature. We know that people tend to make more money in urban areas compared to rural areas – even when they possess the exact same level of education. The returns to being smart and educated are simply greater in cities.

But they also depend on the size of the city. Mark Muro and Jacob Whiton of Brookings recently published data looking at labor market performance – by metro size – from 2009-2015 (right after the financial crisis). What they found is that larger metropolitan areas simply performed better than smaller ones.

In summary:

City size matters because it’s a major influence on city prosperity and adaptability as well as local worker fortunes. Bigger cities are more productive . They are more innovative . They draw better-educated workers by offering higher wages .

The situation is even more pronounced across the pond. According to the New York Times (quote from Richard Florida), a third of Britain’s gross domestic product comes from London alone.

What is far less clear is what should be done to address the decline of some of the smaller cities in America – cities that are stagnating and feeling left behind. But perhaps the first step is acknowledging what has happened and what remains feasible in today’s global economy.

Here is another quote from the above NY Times article:

Mr. Trump’s promise to relieve the pain by reviving the coal and steel industries, by keeping immigrants out of the country and by raising barriers against manufactured imports is only a rhetorical balm to satisfy an angry base seeking to reclaim a prosperous past that is no longer available .

That rhetorical balm.

This morning the Toronto Star published a detailed autopsy of the failed Trump International Hotel and Tower Toronto . It outlines the players, the investors, and what supposedly went wrong. Of course, the headline is all about how Trump managed to make money from the deal – through his well-publicized licensing business – even though the project went bankrupt.

At the beginning of this year, the Washington Post reported that Trump’s name had been licensed and linked to over 50 properties and that these contracts have earned him at least USD$59 million in revenue. Outside of the US and Canada, the Trump Organization has (or had) deals in Brazil, Turkey, Azerbaijan, India, Indonesia, the UAE, and so on.

There would have been more money to be made in the actual development of these properties, but the beauty of these licensing deals – for Trump – is that they are “ low-effort, low-risk, high-reward .” In fact, this past summer it was reported that the breakup fee at Trump Toronto – the fee to exit all contracts with the Trump Organization – was at least $6 million (guessing that’s in USD).

This story is not unique to Toronto. And so I have got to believe that there’s major brand dilution happening here. Does the Trump name really bring credibility to projects in some markets? How sustainable is this licensing business? 

The only other thing that I would add to the Toronto Star article is that the hybrid condo-hotel model has proven to be difficult in this city. It’s perfectly fine to have residential condos and a hotel in one tower. There are lots of successful examples of those. But when the condo units can be put into a hotel pool (and there’s an IRR expectation on the part of individual owners), many seem to have been disappointed.

Part of the challenge with this model here in Toronto is that the condo-hotel units typically end up with a commercial property tax rate , which, in this city, is much higher than the residential rate. This can suppress values.

Photo by NeONBRAND on Unsplash

Daniel Ibañez, Clare Lyster, Charles Waldheim, and Mason White have just published a book analyzing the Great Lakes and the Saint Lawrence River. It’s called,  Third Coast Atlas: Prelude to a Plan .

The Great Lakes represent the world’s largest collection of freshwater; a feature that is likely to become only more valuable. Their coastline is longer than the Atlantic and the Pacific coastlines of the US, combined. Hence the name “Third Coast.”

The reason the book is called a “prelude to a plan” is that it doesn’t propose a plan or a path forward. Instead, it is focused on analyzing the current state. Here is an excerpt about the book taken from the Daniels Faculty :

Third Coast Atlas: Prelude to a Plan describes the conditions for urbanization across the Great Lakes region. It assembles a multi-layered, empirical description of urbanization processes within the drainage basins of the five Great Lakes and the Saint Lawrence River. This thick description encompasses a range of representational forms including maps, plans, diagrams, timelines, and photographs, as well as speculative design research projects and critical texts.

I find this topic fascinating and I suspect that many of you might as well. It’s also an important one. So I wanted to get it on your radar. If you happen to be in Toronto next week, the launch/book signing is happening this Tuesday, October 24, 2017 .