Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 359

Summit County Council is holding a special meeting this week to vote on the acquisition of an 8,576-acre property next to Jeremy Ranch and around the corner from Parkview Mountain House .

The County Manager has recommended approval of the deal and these are the terms:

- $55 million total purchase price (about $6,413 per acre)

- Structured through a $15 million three-year option to purchase, with a right to extend for another year for an additional $5 million (option fees to be applied toward the purchase price)

- During the option period, the County will have control of the property and pay $5,000 per month in rent

Another way to look at this deal is that Summit County needs to initially come up with $15 million of equity. This is because they are getting seller financing for the remaining $40 million. (Implied loan-to-value of about 73%.)

After 3 years, they will have to put in another $5 million, which lowers the implied LTV to about 64%. But in both cases, and assuming the $5k per month is all the County needs to pay, there’s effectively no interest on this 4-year “financing”. ($60k per year on $40-45 million.)

The purchase price is also only ~$6k per acre, which should tell you that this is not development land. Its value is what you see here:

And this is exactly what Summit County intends to do with the land: conserve it. As one of the last contiguous mountain ranches in the area that is privately owned, this sure seems like a win for the community. It’s a pretty good deal, too.

Images: Summit County, Utah

Amazon was founded in 1994 and went public in 1997. By 1999, some 5 years after the company was started, only about 1% of total retail sales were being done online in the US. So you have to give it to Bezos, he saw what was coming and he got in early to help create it. This was not so obvious back in the mid 90s. The internet as a whole was still being viewed with skepticism, especially after the dot-com bubble.

Today, online shopping represents over 15% of total retail sales. (See above chart from Charlie Bilello .) The pandemic pop is over, but it looks like we've returned to a pretty clear trendline -- up and to the right. I guess the questions now are: When and where does this start to flatline? It doesn't seem likely that this goes to 100% in the foreseeable future, especially if you include grocery. But it's going to go a lot higher.

For myself, if I were to exclude food/grocery, I would say that the vast majority (80-90%) of my retail purchases are done online. Even if I'm in a physical store, I'll often pull out my phone to price compare. If it's cheaper on Amazon, I'll just order it there.

Here's another example.

This past summer when I was in Park City, I discovered the brand Vuori . I had heard of them before, but I had never actually seen or touched their clothes. It's great stuff. But instead of the store convincing me to buy something, it convinced me that I like the brand and that I should probably shop on their website at some point in the near future. And that's exactly what I ended up doing. (Sorry Lululemon. You're still my favorite.)

All of this is perhaps obvious in a world where 15% of total retail sales are happening online. But I would imagine that the retail landscape and our cities will look very different when this number goes even higher. Our cities were different at 1% compared to today at 15%; so imagine what 50% or 80% might be like.

Montreal has a bylaw that came into effect on April 1, 2021 and that requires developers to contribute to the city's supply of social, affordable, and family housing. (All three of these have their own definition.)

Developers can meet this requirement in a number of different ways:

• They can build the social, affordable, and/or family housing

• They can contribute land or a building

• Or they can pay cash-in-lieu

Usually, I think of inclusionary zoning as being the first of these three bullet points: a hard requirement to build a certain amount of non-market housing. That is not an absolute requirement here, and so I see this policy as being IZ lite.

Since the bylaw came into force, there have been approximately 150 new projects by private developers in Montreal, according to this CBC article . That has resulted in about 7,100 new market-rate homes. At the same time, it has resulted in exactly zero non-market homes.

From what I can tell from the article, every single developer has opted for option three: pay the cash-in-lieu instead of actually building the housing. Supposedly this has produced about $24.5 million in new fees, which sounds like a lot. But if you divide it by 7,100 homes, it isn't all that much: just under $3,500 for each new home.

So what is clear is that this is the least expensive option. That's why everybody is choosing it. If the fee was significantly higher and it was cheaper to just build the social/affordable/family housing, then every developer would just do that. This is how development pro formas work.

But at the end of the day, we are still taxing new housing and new home consumers for the purpose of trying to create a smidgen of more affordable housing. And this has never sat well with me , especially considering that there are plenty of other things that we could be doing to make new housing more affordable for everyone.