Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 409

Well sort of.

Previously leased to Macmillan Publishers for the last 60 years, the building has been sitting vacant since 2019 and supposedly needs something like $100 million in CapEx to make it leasable again. Four of the five current owners have wanted to renovate it, but the fifth kept blocking it, and so the other partners sued for a "partition auction."

That auction happened last week, and even though the four owners were really trying to lock down the 25% share that they didn't own, the auction was won by an outsider at $190 million . That said, a 10% deposit was to be due the following day and, apparently , that never happened. So maybe it hasn't sold yet. But whatever, it's still interesting to think about its purchase price.

According to Wikipedia , the Flatiron Building is 255,000 square feet. So at $190 million, the building was "purchased" for $745 per foot. Assuming that it needs another $100 million, that's another $392 psf, for a total of $1,137 psf.

What I am curious about now is how this compares to other office buildings in midtown Manhattan. Is there any sort of premium for being the Flatiron Building? And what would space in this building lease for following a renovation? i.e. What cap rate is the market demanding right now for an empty office building needing $100 million in renovations? Or, is the play to convert to residential?

I don't know enough about the real estate market in midtown Manhattan to answer these questions with any sort of precision, but I'm hoping some of you do and that you'll leave a comment below.

On the exact same day last week, the Toronto Star published two articles about housing. The first one, this one here , is about how "Toronto has protected huge parts of the city from anything denser than detached or semi-detached houses" and how this has resulted in an "uneven city." The second article, this opinion piece , is about the "many repercussions to replacing little bungalows." And one of the implied repercussions is that 3-storey sun blockers that invade privacy might actually kill people. Hmm.

In effect, these are the two sides of this debate. If you zoom out and look at Toronto, you will largely see a contrasting and uneven city of tall buildings and low-rise housing . Instead of building like Paris , which is consistently mid-rise -- but also far denser on average than Toronto -- we have chosen peaks and large plains to constrain new housing. And if you zoom in across those plains, you'll find many areas without sidewalks , along with people, such as the author of the second article above, who believe that nothing more than a single storey is appropriate for human health.

All of this has persisted because it has been politically popular . But time continues to show us that it actually runs counter to our goals of building an inclusive and globally competitive city region. Thankfully, it feels like we are finally reaching a tipping point .

Photo by  Jackson Case  on  Unsplash

I went to bed last night watching President Biden's address to the Canadian Parliament (full transcript, here .). And I woke up this morning to this Globe and Mail article about Canadian competitiveness. In it, Tony Keller talks about some of the things that are broken in this country (shockingly housing comes up), and compares Canada to Argentina (an example of too many bad decisions) and to South Korea (an example of many good decisions).

All of this got me thinking about leadership.

Leadership is a great burden. As a leader, people are looking to you for decisions, for direction, and for you to instil confidence. They are also scrutinizing your every word and action. And in today's world, they are waiting to criticize you on social media and/or make a funny meme out of your most recent misspeak. As a developer, I get to interface with municipal politicians probably more than your average person, and I can tell you with confidence that it is a thankless job I would never want.

I can only imagine having to constantly worry about your employment and what people are thinking. Given this incentive structure, I'm sure we'd all act accordingly. It is truly public, service . At the same time, I know that it is not only unproductive -- but dangerous -- to pander to just what is thought to be politically popular. And we have spoken many times before on this blog about housing and land use policies that may be popular, but aren't at all effective -- or worse, are counterproductive.

What we should be demanding from our leaders are difficult decisions. These are the decisions that probably feel uncomfortable and that may require some personal sacrifice, but that are ultimately the right decisions for our collective long-term prosperity. It is about ambitiously deciding where we want to go and who we want to become, and then taking meaningful actions, however unpopular they may be, to get there.

Don't just tell me what I want to hear. Lead me. Push me. Be bold . In the end, we will respect you for your personal sacrifices and the difficult decisions you are making on our behalf. This is the great burden -- but also the great opportunity -- of leadership, and it behooves us to empower it. To borrow from Tony Keller, "there's no reason we [Canada] can't be the most prosperous and successful society on earth."