#02 - Building a Development Company
Thoughts and updates on my businesses
Imprint Development
I started Imprint Development in March 2023. The purpose of Imprint is to build, own, and operate great residential real estate in the Toronto area.
My primary motivation is to focus on quality: I want to create places that are so good that future generations think they’re worthy of preservation, and I want to provide service so good that my investors won’t want to work with anyone else.
There are a few things that make Imprint a little different from other development companies:
Building for the Future
Imprint has a strong orientation toward the future, which plays out in several ways.
My entire development career has centered on building rental apartments and mixed-use communities. When you build rental, you have to focus on longevity or you’re toast. This is because you are exposed to all the consequences of the decisions you make. One former boss used to put it nicely. To paraphrase his point:
You only need to sell a condo once, and that’s usually done before it’s built. After the warranty period you’re in the clear. As a rental developer, you need to sell that apartment every year or two for the entire life of the building, and your customer gets see it in person before they buy.
This means that you need to be more mindful of the tradeoffs that are made at each stage of the development lifecycle. Shortcuts during zoning are likely to cost you during construction, or even after the building is occupied. Saving $1 on the front end can cost you $100 on the back end. I have generally managed projects through all phases (initial underwriting through stabilized operations), and I have definitely made some expensive mistakes. Because of this experience I am laser focused on addressing issues as early as possible, and on optimizing decision making over the entire lifecycle of a development project.
This orientation now comes pretty naturally to me, but I also think it’s better for business. I find that my job is made easier when incentives are aligned between the developer, the investor, the consultants, and the customer. What I love about new rental housing is that I need to compete with other talented developers to win the best renters. This means I need to constantly level up my game. I need to assess what my customer wants, whether my decisions are actually delivering value, and how to steer my team toward delivering on our value proposition.
This orientation also influences who I should partner with. Imprint is going to be a good fit with investors and landowners who take a long-term view of their assets and what they want in a relationship.
Building Great Processes
Imprint also takes a different approach to project management. In the years since I moved back to Toronto, I’ve built a broad network of development professionals in the city and I love asking them how their companies function. What they tell me is fascinating, and I enjoy comparing/contrasting what they tell me with how I learned the business in the States. Here’s an example: many firms in Toronto have a hierarchical and vertically oriented project management culture. What do I mean by this?
By hierarchical, I mean there tends to be a lot of layered authority. A Vice President of development might oversee eight projects, which are in turn managed by four Development Managers, each of whom supervises a couple of Development Associates or Analysts. The VP spends a lot of time absorbing information from her direct reports, and then summarizing and reporting that information up to executives. This structure means that a lot of time is inherently spent on shaping information rather than actively problem-solving or de-risking projects. Another common aspect of this kind of structure is what I call “parachuting”. Because senior executives are structurally separated from the day-to-day work of a project, they tend to identify risks and problems (or perhaps just decisions that they personally like to be involved in) after key work streams are already underway. This means that a senior executive will often feel the need to drop into a project and make major changes, which invariably causes delays and re-work.
By vertically oriented, I mean that projects are managed by different types of professionals depending on where the project is in its lifecycle. For example, it’s very common for one person to manage initial underwriting and acquisition; for another person to manage design and planning; for another person to manage construction; and yet another person to manage lease-up and operations. This structure comes with tradeoffs. On the plus side, leaders can embed their own judgements bureaucratically, and codify certain aspects of the business, such as design standards or operational processes. In theory this allows them to get out of the weeds and focus on scaling up the business. The biggest downside of this structure is a lack of ownership at the project management level. Each person inherits the decisions of their predecessor, does their best to mitigate any unforeseen issues, and then hands the project over to someone else without ever having seen the bigger picture. In this environment, there is relatively little feedback when one of your decisions has a serious consequence that only arises years later (which is extremely common in real estate development).
Imprint takes a different strategy. I’m a big proponent of flat organizations and horizontal project management. This means that senior professionals are distributed across an organization, and they work directly on a smaller number of projects. For example, a Principal might be paired with a Development Manager (DM), and as a team they could actively manage two construction projects and another that is early in design or approvals. Each DM serves as a quarterback through all project phases and is accountable for all outcomes. This means that the DM is motivated to balance short-term considerations with the long-term success of the project.
Early in my career I felt differently, but today I don’t see much value in lots of different job titles. Sometimes you need to give someone a title because that’s what everyone else in the market does. But I think Associate, Manager, and Principal cover the basic functions of a development company pretty thoroughly.
Building Great Incentives
Compared to Canada, it’s much more common in the US for employees of a development firm to financially participate in the firm’s projects, whether through co-investment or profit sharing.
In Toronto this tends to be the exception. Perhaps because larger firms dominate, and this type of compensation structure is more difficult to implement at scale. The downside of not allowing (or not requiring!) employees to invest is twofold. First, it reduces employee retention in a business where each project takes 5-7 years to complete. This can be devastating to a project, so it’s very important that employees stick around until they meet key milestones. Each time you change project managers, you lose much of the detailed knowledge and close working relationships that kept a project humming along smoothly. This often causes delays and lots of small points of friction. Second, a lack of financial participation means that employees don’t pay a price for making bad decisions, nor are they rewarded for making good ones. I’m a big believer that incentives are everything, and if you want great performance, you need to incentivize great performers.
As for Imprint, I intend for every project to be managed by someone who is personally invested in it. As a corollary, every future employee who works on projects will share in the profits of those projects.
So that tells you a bit about the kind of company I am building. Next month I’ll write about what Imprint is doing in its first year.
Urban Progress
One of my side projects is a magazine called Urban Progress. I’ve never worked in publishing before, so this has been a huge learning experience. September was a big month. We hired an Operations Coordinator, Sam, to help us push the second issue to print by the end of this year.
So far Urban Progress has been a personal project, mostly funded by me and my co-founder,
. We also have a number of subscribers on Patreon, and we’re grateful for their support!Each issue of the magazine costs around $25,000, and our Patreon subscriptions aren’t going to cover that cost any time soon. Now that Sam is on board to help us push production forward, Chris and I need to pivot and focus on fundraising. We’ve settled on a strategy of targeted fundraising, where we will ask our friends in industry to support what we’re doing.
Why would they want to support Urban Progress?
Because we’re in the business of spreading contagiously good policy ideas to the exact right people. I can explain using an anecdote that we heard from staff at the Ministry of Municipal Affairs and Housing (MMAH).
In Bill 109, former MMAH Minister Steve Clark included a commitment to have the Ontario Building Code updated to allow buildings of 4 to 6 storeys to be built with a single egress stair. Why did he do this? Because he saw this Conrad Speckert chart (full piece here). That’s the impact of good ideas + good presentation + good distribution. There are people–including senior political staff–who are empowered to push housing and transportation policy in a positive direction, but they usually aren’t experts in this field. They’re often just looking around for the right thing to do.
Through Urban Progress, our goal is to give them a continuous feed of the right things to do.
In the News
One big surprise in September was the federal government getting rid of the 5% Goods and Services Tax (GST) on new rental housing in Canada. Only a few days later, the Ontario provincial government followed suit and gave up its provincial portion of sales tax (equal to another 8%). This is huge. Previously, upon completion a typical new rental building was required to pay around 9-10% of total project costs to the government as sales tax, even if the building wasn’t sold! This change will make many marginal rental projects feasible.
One reason this announcement surprised me is that the current Liberal government has been very weak on housing policy. Their answer to the affordability crisis has generally been demand-side subsidies for homebuyers and renters, with little or no acknowledgement of the policy failures and cost pressures that led us to this point. The Conservative opposition has been eating the Liberals’ lunch on this issue for months, and it is showing up in polling data. If an election were called today, the Tories would likely win by a large margin. But with this announcement about waiving sales tax, suddenly the Liberals have made the single most decisive move in several years.
This kind of arms race - between the Liberals and Conservatives to see who can unlock more housing - is exactly what Canada needs.
That’s a wrap for this month. Thank you for reading.
Very inspiring projects! I can't wait to hear more about what Imprint is up to.