Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 834

Developing a building can often feel like you're trying to solve a rubik's cube. Among other things, you have to manage a myriad of different stakeholders, all of which -- naturally -- operate in their own self-interest. There's the city, community, politicians, various agencies, consultants, tenants, purchasers, lenders, investors, the market at large (of which you really have no control of), and many others. Oftentimes you even have stakeholders whose interests are mutually exclusive. Indeed, the things that they want can sometimes be at odds with each other. Your job is to figure out a solution that satisfies as many of these interests as possible.

To give you an example, let's say that you've been asked to introduce a stepback into your building in order to break up the elevation. From an urban design standpoint, this may make perfect sense. Hello, datum line. But now your construction costs just went up. You have to transfer your mechanical lines, insulate the roof, introduce new bulkheads, and, for the purposes of this example, let's say you now need to introduce a structural transfer. This is big cost item that you hadn't accounted for. And because you just reduced the height of the building to satisfy another stakeholder, you don't have the excess clear height to accommodate the additional depth required by this new structural element. There is, of course, always a solution. But usually something will need to give.

At the same time, this raises some interesting philosophical questions. What's more important in this example? The urban design move or keeping construction costs low so that the building can be delivered more affordably? The cynics will argue that this is a moot point because developers will always profit maximize. But I would encourage you to check out some of my past posts, such as " Cost-plus pricing " and " The impact of inclusionary zoning on development feasibility ." This problem solving dynamic is one of the things that makes development so challenging. But it is also one of the things that makes it incredibly rewarding.

Photo by  Ivan Bandura  on  Unsplash

The New York Times' fall architecture preview is centered around a pretty important and relevant theme, namely the relationship between the built environment and the natural one.

Some of the projects that they profile include Dock 72 at the Brooklyn Navy Yard, which was raised up in order to lift it out of a floodplain; the "solar carve" tower by Studio Gang , which was designed to prevent shadows from casting along the adjacent High Line (pictured above); and the recently completed Casablanca Finance Tower by Morphosis .

This last one, pictured below, uses thick aluminum beams to shade the building. That's a pretty important feature in North Africa.

Photos by Nic Lehoux and Hakim Wiseman Joundy (via the New York Times )

There are a number of home equity startups in the marketplace today.

A few years ago I wrote about an alternative product to HELOCs or home equity loans, called Point . And earlier this year, I wrote about a startup, called Landed , that is helping "essential professionals," such as teachers, with their down payments. They'll contribute up to 10% of the value of a home in exchange for a share in any future gains, or losses.

Today, another startup in the space -- Patch Homes -- announced a $5mm Series A round. From what I can tell, it appears to be similar to Point in that it involves the fractional sale of home equity. Though, to be clear, the model is distinct from the fractional homeownership that is popular in many high demand vacation destinations. Here's a bit more on how the product works ( source ):

The Patch model enables homeowners to “tap into” their home equity by selling 20–40% to Patch’s affiliate, Patch Capital, which shares in both the upside and downside. The homeowner remains in control of her or his home for the life of the relationship and exits via a sale or refinances in 7–10 years.

While this product is not for all homeowners, it provides a new and important financing option. The Fed estimates that home equity ownership in the US is $15 Trillion. It makes no sense that the only financing options are additional debt or a complete sale of the property. Patch gives homeowners the option to de-lever their personal balance sheet or otherwise raise cash. Clients have used Patch proceeds for numerous reasons, the most popular of which are to pay off debt, increase liquid savings and finance home improvements.

I am not surprised to see this gaining momentum. The biggest benefit is that it gives you partial liquidity (i.e. cash up to $250,000), without having to sell your property or take on additional debt service payments. It's equity, not debt. Fred Wilson, an investor in the company, calls it fractionalizing home equity .