📈 Code red

Good morning. You may notice we have a bit of a new look (and a new website) today. That’s because we also have new ownership — well, actually, old ownership. Five-ish years ago Taylor, Alex, and I created The Peak, and over the next three years, along with our incredibly talented team, grew it to the point someone wanted to buy it from us. We said yes. It was a good opportunity, and to be completely honest, we needed the cash.

Today I’m excited to let you know that we have bought it back. The Peak is once again a founder-owned and founder-led company. Media has changed a lot since we started a tiny newsletter during the depths of COVID (that, for the first few months, only people related to us read). Some things are now more difficult, but there are some real opportunities. We’re focused on the latter. Don’t worry: We aren’t going to mess with a good thing (this newsletter). But we think it can be better, and there are lots of new ideas to try and products to launch. Five years from now, we believe The Peak can be the largest independent media business in Canada, and we’re putting our foot on the gas to get there.

Our mission remains the same: help busy Canadians understand what’s happening in our country and the world, in a way that doesn’t make you want to break your phone or go back to bed. Thank you for sticking with us this far. We’re excited by what’s coming, and hope to make The Peak an even more valuable part of your day.

— Brett Chang, Peak co-founder

Today’s reading time is 6 minutes.

Markets: Scotiabank got bank earnings season started on a good note yesterday, with shares hitting a record high after it beat profit estimates. However, it wasn't enough to offset dips in the energy and materials sectors, which dragged down Canada’s main stock index.

OpenAI started the AI race in a full sprint while its competitors were still lacing up their shoes. Now, as it slows to a modest jog, those rivals are suddenly breathing down its neck. 

What happened: OpenAI CEO Sam Altman sent a memo to staff this week declaring a “code red” mission to improve the quality of its flagship product, ChatGPT. While it works on that, it will delay its other projects, including advertising efforts, health and shopping AI agents, and its personal assistant, Pulse.

Why it’s happening: “Code red” is really just tech-speak for “Google’s caught up to us.” After Google released its Gemini 3 Model, which outperformed the newest version of ChatGPT in industry benchmark tests, Altman told staff to brace for "rough vibes" as they play catch-up. 

Why it matters: OpenAI fired the starting gun of the AI race with the release of ChatGPT, giving it a huge head start over tech giants like Microsoft, Google, and Apple. But that lead is dissipating, and the startup appears to be on its back foot for the first time in a fight for survival — all without the war chests (a.k.a. profitable products) that its competitors have.—LA

Laurentian Bank gets sold. The embattled Canadian bank has finally found a buyer (well, two buyers technically), selling its retail business to National Bank, while the rest of the lender’s operations will be taken over by Fairstone Bank of Canada in a $1.9 billion deal. The deal was described by one analyst as an “elegant exit” for one of Canada’s last remaining small banks. 

Feds set to cut housing spending by over 50%. Despite the federal government's pledge for the most ambitious housing plan since World War II, a new report by the Parliamentary Budget Officer found that Ottawa’s housing spending is set to fall by 56% over the next three years — from $9.8 billion to $4.3 billion. Finance Minister François-Philippe Champagne said the report’s projections don’t account for any of the feds’ future spending plans. 

RCMP completes massive drug bust. Canadian law enforcement seized 386 kilograms of fentanyl, 5,989 kilograms of cocaine, and 1,708 kilograms of methamphetamine from across the country during a five-month operation. Notably, the RCMP said less than 1% of the fentanyl seizures were travelling to the U.S. and that Canada is “not an exporter of fentanyl.”

Weston and Thomson families finalize $18 million deal for Hudson’s Bay charter. Two of Canada’s wealthiest families will now jointly own the 1670 Hudson’s Bay charter, which will be donated and accessible to the public at four cultural institutions. There’s rich, there’s very rich, and then there’s artifact-buying rich. 

Sales scandal forces changes at Shopify. The Canadian e-commerce giant has overhauled its commission structure for signing up new merchants following an investigation that revealed widespread fraud within the company’s sales division. 

Prada buys rival Versace for US$1.4 billion. The Italian high-fashion brands are now officially under one roof, which — according to people who are far better dressed than us — is a big deal. 

Netflix has reportedly made a mostly cash offer to buy Warner Bros. Discovery. From the sounds of it, there’s already a bidding war going on between Paramount, Comcast and the new kid on the block, Netflix.—LA 

Scholastic is making big changes to ensure that its book fairs aren’t just a relic of Zillenial memories. 

What happened: Scholastic is selling its downtown Manhattan headquarters to the company that owns the Empire State Building for US$386 million, trading in swanky Broadway offices for a quick shot of liquidity as it undergoes a bold restructuring effort. 

Catch-up: Things have been soap opera-like at Scholastic since controlling shareholder Dick Robinson Jr. died in 2021. In a shocking move, he left his stake not to his family, but to Toronto native Iole Lucchese, a top exec (and Robinson’s alleged former romantic partner).

Why it matters: From The Hunger Games to Captain Underpants, Scholastic is the world’s largest publisher and distributor of children’s literature, and its struggle to move books is indicative of the broader struggle to get kids reading. 

What’s next: As part of its reinvention, Scholastic is trying to get kids into books by meeting them where their eyes are usually fixed: screens. Last year, it acquired Toronto’s 9 Story Media Group to expand its media footprint, and launched a streaming service this year.—QH

🤝 Meet Chris Spoke. He’s a partner in Toronto Standard, a real estate development firm building rental housing for long-term ownership in Toronto. We sat down with Chris to talk about why so many condos are shoeboxes, what makes up the cost of a development project, what’s stopping housing from getting built, and more.

What are the biggest barriers to more housing getting built in Canada's big cities? 

Municipal land-use rules and taxes. We have regulated real estate development so aggressively that large parts of our cities are effectively off-limits to meaningful intensification. Even where development is permitted, developers can expect to spend more time securing approvals than actually building. These rules are embedded in municipal Official Plans and zoning bylaws and increasingly feel like a last vestige of Soviet-style top down economic planning.

As a developer, how do your costs break down these days? 

On a midrise building we’re working on in Etobicoke, we’ll spend approximately 10% of our total project costs on land, 10% on charges, fees, and taxes, 7% on planning and design, 7% on debt service on our land and construction loans, and about 65% on construction. It is worth noting, however, that land prices are inflated by regulated scarcity, design costs are inflated by excessive municipal requirements, and construction costs are inflated by some costly and unnecessary building code provisions. In other words, the true impact of policy on our total costs is much higher than that initial 10%.

Why were so many condos built like shoeboxes over the past 20 years? How do we get more housing built that's suitable for families again? 

This opinion is not shared by all commentators, but my view is that small units were built over the past 20 years because that is what the market wanted. Toronto has more single and childless people than married people with families to begin with. In a market where supply is as constrained as it is here, housing becomes quite expensive, and small units cost less than large ones. If we want developers to build larger units, there are some things that could be improved in the building code, such as allowing single egress in more cases, but ultimately we need an agenda of abundance that gives end users so many good options that they pass on the shoeboxes.

This excerpt has been edited for length and clarity. Read the full interview on our website.

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🛩️ 973. Chinese-made drones that the RCMP uses, making up 80% of the federal police force’s entire fleet of drones. The RCMP has now made the decision to restrict the use of its Chinese drones to non-sensitive operations, citing the “high security risks” of using them. Replacing the devices with non-Chinese alternatives is expected to cost over $30 million.

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Have no fear, today’s mini-crossword is here!