Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 763

https://twitter.com/pmarca/status/1251634412334141440?s=20

Marc Andreessen's recent essay, called "It's time to build," is destined to ruffle feathers. In it, he not only sings the virtues of building in its broadest sense -- everything from healthcare and housing to education and manufacturing -- but he calls out the western world for smug complacency with the status quo. We are no longer choosing to build. And a good example of that is how we have been managing (and mismanaging) this current pandemic.

Here's an excerpt:

In fact, I think building is how we reboot the American dream. The things we build in huge quantities, like computers and TVs, drop rapidly in price. The things we don’t, like housing, schools, and hospitals, skyrocket in price. What’s the American dream? The opportunity to have a home of your own, and a family you can provide for. We need to break the rapidly escalating price curves for housing, education, and healthcare, to make sure that every American can realize the dream, and the only way to do that is to build.

Marc has also included a suggested reading list if you click through on the above tweet. By the time you do that, I am sure there will also be a lot of discussion around his essay.

I was recently asked about why I'm not writing more about the impact of COVID-19 on the real estate industry and on city building more broadly. The honest answer is that, like everyone else, I've been preoccupied with two other topics: our health and our economy. And as we write this playbook for the very first time and start to think about reopening the global economy, these are the two things we are obviously going to need to balance.

I also don't believe that we're going to see a fundamental reshaping of our cities. Many of the trends that were already underway could get accelerated. But it feels too premature to prognosticate pivotal shifts in the way we are going to live our lives (though they make for good headlines). And, ultimately, I believe wholeheartedly in what Fred Wilson wrote earlier this week: "In person social interaction is the core of being human and I think this pandemic is reminding all of us how vitally important that is."

All this said, it is probably time to talk about what's happening in the real estate / development space.

Much of the real estate industry has been focused on rent collection and on working with all of its various stakeholders so that as many people and companies as possible can make it to the other side of this. Everyone has bills to pay. Tenants have expenses. Landlords have expenses. And I don't think that many people appreciate how interconnected and circular the whole system is. The rents that get paid are, in many instances, being used to fund people's retirements. (i.e. The real estate is owned by pension funds.)

Earlier this week, Slate Office REIT announced that it had collected 97% of April rents and Slate Retail REIT announced that, as of April 14th, it had collected 80% of April rents. These are extraordinary numbers, particularly when you consider that retail and hospitality are two of the hardest hit asset classes right now. Over 60% of Slate Retail REIT's portfolio is made up of essential tenants, such as grocers and pharmacies, which is why this number is so above average for the retail space. This was a deliberate decision made well before COVID-19.

On the development side of things, projects in the approvals phase are still moving along, albeit more slowly. All municipalities have rightly cancelled in-person council meetings and in-person public meetings. But I don't see why these can't shift to an online forum and I hope that we will see that happen sooner rather than later. We are spending time on this. I also see it as an opportunity to reconsider how community engagement is done and how the process can better collect broad-based community feedback. As we all know, public meetings tend to attract one particular demographic.

Pre-construction condo sales and land sales have slowed dramatically. As Charlie Munger mentioned in the Journal this week: "Everybody's just frozen." We are all trying to glean what the future holds. (Charlie and Warren have been remarkably quiet over the last several weeks, but they'll be on the online stage -- on my birthday -- for their annual meeting .) At the same time, we have noticed sentiment start to become more positive over the last week or so and we have sold a number of larger suites at Junction House . In my humble opinion, now is an excellent time to continue making these sorts of decisions if you are in a position to do so.

I will end by saying that we are all trying to find our way during this unprecedented time. Now is not the time for parochial attitudes. We are all in this together. It is our health and our economy. The global economy is far more interconnected than some might think. If any of you know of causes that you believe should be supported right now, I would encourage you to leave those suggestions in the comment section below.

I am sure many of you are getting tired of the news. I know I am. But it turns out that when you're in a global pandemic and you spend the entirety of your day looking at Zoom -- while fidgeting your leg, I might add -- there's only so much else you can talk and write about.

One of the more interesting things you could read is Howard Marks' memos . Howard is the co-founder of Oaktree Capital Management and, from what I can tell, he's been writing since 1990. Some years it's an annual memo and some years -- like this year -- he writes a bunch more. His most recent is regarding, " Knowledge of the Future ."

If I had to summarize it: The future is unknowable and none of us can say with any certainty what the next quarter or the next year is going to look like. In Howard's words: "These days everyone has the same data regarding the present and the same ignorance regarding the future."

Most of the time, he explains, we simply extrapolate from the past and then apply our own biases to come up with a prediction. Howard describes himself as more of a worrier, whereas I would describe myself as more of an optimist. I believe, to a certain extent, in creating self-fulfilling prophecies.

Notwithstanding our inability to predict the future (which isn't a new phenomenon), I think it's important to have opinions and take positions. Any decision is better than no decision, right ?

For a full archive of Howard Marks' memos, click here .