Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 312

I am not a lawyer. Nothing I write on this blog should be construed as legal advice. In fact, it is highly questionable whether anything I write here should be construed as any sort of advice. Still, Trump's fraud trial is an interesting one for us to discuss. The case, as I crudely understand it, accuses him of "inflating his net worth to dupe banks" and "issuing false financial statements every year between 2011 and 2021." And possibly some other things, too.

Now there are some people who are saying that there's nothing actually wrong with the way Trump conducts his real estate practice. Kevin O'Leary, for instance, was just on CNN saying, "every real estate developer everywhere does this." His position was that if you're going to fault Trump, then you need to go after every developer out there. Here's the video interview where he says this:

https://youtu.be/80RZs9Fhz3Y?si=DSuCa0PwVWx_wbVe

Let's break this down. Kevin is right in that people who own real estate ordinarily want it to be worth as much as possible. This is true for individual homeowners and it's true for large real estate companies. And there are various reasons for this. One reason is that it maximizes your debt proceeds. For example, if you buy a building for $100 and the banks are willing to give you a loan based on a LTV (loan-to-value) of 70%, then you will get $70 in debt proceeds and you will need to put in $30 of your own cash equity.

However, if you buy a building for $100 and it ends up being worth ~$143, then this same 70% LTV will result in $100 of debt proceeds. This means that you won't need to put in any of your own cash and that, for all intents and purposes, you just got a building for "free." By most metrics, this would be considered a good real estate deal. (Of course, you could also buy a building for $100 and have it be worth only $50. And this would be much less fun than getting free real estate.)

One important question, though, is how does the building end up "being worth $143?" Well, one scenario could be that you just bought really well. It was an off-market transaction (i.e. it wasn't formally listed), the seller was highly motivated, and so you negotiated a below-market purchase price. You then went out and hired a reputable third-party appraiser who did a bunch of rigorous research and issued you a report that said, "your building is worth $143." And this would be perfectly fine.

But one can also imagine ways in which someone could lie and do nefarious things to try and convince people that their building is worth $143, even if it clearly isn't. Now, at the end of the day, I don't know the facts of this case. So I can't comment directly. But I did want to use this as an opportunity to add some nuance to Kevin's claim that "every real estate developer everywhere does this." Ultimately, that depends on what "this" is. Are we talking about doing customary things to maximize value creation? Or are we talking about fraud?

Leisure travel, according to Resonance , is growing:

In fact, spending on leisure travel and recreation has outpaced the overall growth in consumer spending over the last decade, and inflation-adjusted spending on leisure activities as a share of overall consumer spending grew from 9.5% in 2013 to nearly 13% by 2022. This means that the travel and tourism industry is getting a growing share of a growing pie, which bodes well for the long-term future of those hotels and destinations that cater primarily to leisure travelers.

And so are blended trips (trips that combine business and leisure). Though the way people are going about it has evolved:

What used to involve adding a day or two on the weekend to a weekday business trip has shifted to the mixing of business and pleasure throughout the week. With a greater percentage of the workforce in the U.S, Canada and the U.K. only going into the office 2-3 days per week, workers from these countries are free to blend their travel for up to a week. And with as much as a quarter of professionals in the U.S. now working remotely, a whole new class of nomadic travelers has emerged who are able to travel anywhere, anytime—as long as their accommodations have adequate high-speed internet and appropriate workspaces.

At the same time, cities are really clamping down on short-term rentals , which is a common way people do blended trips. Resonance believes this will create new opportunities:

But while increased regulation and enforcement of the sector will wipe out the businesses of many “professional” hosts and investors, it’s also creating new opportunities for cities and developers to create new neighborhood-oriented hotels that satiate travelers’ desire for local experiences while also being additive to the quality of life of local residents.

It might be the case that these two things are inversely correlated. More people are traveling for fun and for work, and so now cities are trying to manage that demand; more travel leads to more regulation. Whatever the case, I do agree that this is an important consumption trend.

My working theory is this: if money wasn't an object, a lot of people would love to have homes all around the world and live in multiple places. I certainly would. And the list of places is already in my phone. But since this isn't practical for most, we have Airbnbs, neighborhood-oriented hotels, Soho House global memberships, and the ability to buy fractions of second homes .

These solutions all respond, at least partially, to our desires for new experiences and for a deeper attachment to places. But now that tech is expanding the reach of cities , these desires are becoming further untethered. And so my view is that there's going to be a lot of opportunity in the world of "making people feel like they're global citizens."

Last week, I decided to order a RECCO rescue reflector for my snowboard helmet (the red strip pictured above). My new jacket -- a wonderful Christmas gift -- doesn't have one built in, so I decided it couldn't hurt to just stick one on. They cost about $50.

However, a passive RECCO reflector is not an avalanche beacon. These reflectors only work if a rescue crew has active RECCO detectors on hand. I don't know what percentage of resorts have them, but if you've ever been cat or heli-skiing, or if you do backcountry skiing, you'll know that what you need is a beacon.

Avalanche beacons generally have two modes: a sending mode and a receiving mode. When you're riding, you want it in sending mode, meaning you're automatically transmitting your location. No further action is needed.

If something bad were to happen, and someone gets lost, everyone in the group will then switch their beacon to receiving mode. And this is how you go about finding someone if they've been caught in something like an avalanche.

I don't know that many people who do this while skiing inbounds , but today's tragedy at Palisades Tahoe is a reminder that sometimes bad things can happen even within managed resort areas. My heart is heavy for the skier who died today.