The Entrepreneur Podcast
The Entrepreneur Podcast

Episode · 2 years ago

11. Embracing Evolution with HighStreet Ventures Inc. Founder Scott Butler

ABOUT THIS EPISODE

For the past decade, Scott Butler, QS '16 has been the founder and CEO of HighStreet Ventures Inc. In today's episode of the Ivey Entrepreneur Podcast, Scott retraces his entrepreneurial journey, from leaving WestJet, and becoming a real estate developer in one of Canada's hottest markets.

You're listening to the iby entrepreneurship podcast from the Pierrol Morrisset Institute for Entrepreneurship at the Ibbey Business School. My name is Eric Morris and I will be your host for this episode. For the past decade, Scott Butler has been the founder and CEO of High Street Ventures Inc, a real estate developer in one of the hottest markets in Canada. Here's Scott retracing his entrepreneurial journey. Well, we started doing real estate development when I left west yet. My wife and I decided to start our own business and that was at the end of two thousand and four and just so happened that one of the CO founders of West yet, Down Bell, told me when I was leaving that he would back whatever we started. So I gave us the confidence to go out there and find something. Didn't know we're going to do real estate of the time, but that ended up being the top of the list. Had about ten things that we were thinking about doing and and real estate development came out on top. So kind of came by naturally, I guess. My Dad had a construction company when I was growing up and my brother was doing construction for other developers. So seemed like a natural fit to play the developer role and and go out and start doing real estate. So wasn't I mean it was familiar to you. You kind of had a sense of what it was all about. You thought you could take that on, but your business model was a little different. Tell me a little bit about that. Yeah, I oddly it wasn't that different in the beginning. We didn't have the plan that we then embarked on later. I think the in the early days it was just a matter of survival and and trying to find opportunities and, you know, making a making a business for yourself. I didn't have any employees at the time. It was just get out there and try to get a project going, and our first one was a condo project in Courtney. I suppose even at that time we had the idea around doing repeat buildings. So we knew that that was a primary concept that we wanted to apply, which was,...

I suppose, similar to the West jet philosophy of the same aircraft type and efficiencies you get out of that. So we knew that if we repeated the same buildings it would become more efficient and we get better at it. Even on our first sight we had three buildings and they're all identical. So that was a certainly an early mandate. And then it wasn't until the downturn in two thousand and eight that we really got onto the current model. And that was and again, kind of happens stands. It wasn't there was, there was, there wasn't a big master plan. It was just again, we are survival. It was how do you? How do you a turn? We had some early success on the first project and then built a hotel and had to sell that. We're the only hotel sale and BC and and in two thousand and nine it's really only hotel sale and times we're a little difficult. And it was really a combination of my brother had done a lot of construction for rental apartment developers and we always was always interested in that model and I always liked it but couldn't figure out how the numbers worked until we did the hotel. And there was a big epiphany when when we did the proform was on the hotel and then looked at take out financing on the hotel and of course you build with financing based on cost in your takeouts based on value and all of a sudden we realize you could take out a bunch of equity that you'd put in initially. You could take it out once the buildings full and cash flowing, and then the numbers made sense. Then the numbers could actually get you double digit returns, to the point where it made sense to actually split the difference between you know, it's actually split so that as as people that were running in the development, we could get a margin out of that and still have enough left over for the investors. And it was really the hotel that led to that epiphany. And then it was Oh hey, we can do this with rental apartments, and then started going gangbusters on...

...rental apartments. And so once you started in rental apartments, the rest of it was, like you said, you had the epiphany, but the rest of it was more kind of gradual learning. Hey, if we do the same structure repeatedly, we're going to get better at it, we're going to lower prices. You know, tell me a little bit more. How did the business model evolved? Yeah, for sure it was. In the beginning it was literally looking at what other developers were doing and and you know, well, there's a there's a model that we could follow. You know, two bedrooms predominantly, and they're all too bad. One bath of the time for rental and, you know, pretty basic building. We call that version one. Oh we had we actually went into markets like yellow knife, I thought we were going to do rental and sold them as Condos, and that was an eye opener as well, just the ability to pivot to Condo if there was an opportunity, but not focus on Condo. So we've we've still done a fair amount of Condo in our past, but not we don't go into markets thinking we're going to do condo. It's very rare. Your Balu propositions interesting though, because it's apartments is what you go after, but it's it's a nice it's almost condo level. Oh yeah, it's evolved over the years, for sure. I mean we're now we're we can easily transition between rental and Condo of the market dictates. So it's yeah, we're you know, it's too bad too bath courts, countertop standles, steel appliances. All right, he couldn't tell the difference between what we build in a condo other than our it's actually more energy efficient. But right and that's evolved as well. Right in terms of part of the business model, the value proposition for people coming into these apartments. It's when it's high end and too it's, you know, really energy efficient. You guys just recently won a number of words. Tell me about that. Yeah, absolutely. Well, part of it, I suppose, the we've got a goal to have a thousand net zero homes that we own an operate by the end of two thousand and twenty four and that probably came more from philosophy. But we also recognize that there's...

...a there's a payback there. When you're building and selling, the cash flow really dictates the value. So if you can reduce the expense side and increase the cash flow, a lot of these energy efficiency improvements pay for themselves and and more so for us it was it was about math and we are willing to spend beyond pure math on making it more efficient though, and and help, you know, push the industry in what we think is a logical and and correct direction, both from a financial standpoint and for doing what's right. But I'd say in their early days there wasn't there wasn't as much push on that. Certainly the hotel we built had a lot of energy efficiency built in and and water savings and everything else, but it did take a while to come back to that. I think once we really figured out where we were with the product, it gave an then kind of independence of thought through changes and in our structure and our partnership structure. It was really about what we want to be known for and how are we going to you know, what change we're going to make in the industry, and that really led to to the net zero vision. Terms of the product itself, a lot of that was response from the market pushing where we where to go in the beginning. And you know, when we first started doing this in two thousand and nine there wasn't a lot of competition and so no matter what you built in Alberta, they would fill up and you'd be competing against much older product that was built in the or s and there wasn't a lot of new and then that as that changed over the years, you'd have a lot of condo builders that entered the market in their rental space and and that created an uptick in in the level. We also got the feedback from institutional buyers that I remember specifically we had in the downturn in Alberta, one of our projects that we did...

...there. We wanted to sell it and it was after the down turn, so after post I guess it was early two thousand and fifteen, and we had what we thought at the time we're great layouts. We had, you know, two bedroom, one bath, dining room, courts, countertop standle steel appliances. So we pushed kind of everything else in that direction, the underground parking, everything else, and we fully underground. We I think about three or four years ago we start doing everything with underground parking. So we thought it was a it was a really good product and the institutional buyers boxed because they said they wanted to bed, to bath and nine foot ceilings and we had eight foot ceilings. And so you in in a time of of, you know, having to sell. The institutional buyers had other product to choose from that had had what they were looking for, and so we were last on the list when it came to selling. Ended up selling to a private company, not an institutional buyern it, and the price suffered for sure as a result. So so you kind of some of these changes get forced on you through you know, you get beat on the head with with okay, that's what the market demands. Now, whereas you know, it's not always brilliants where you just you realize it when you when you're in a bit of a crisis, that Oh crap, that's not what we should be doing anymore, and so you just make the change without even fun not the financial consideration, because you couldn't. Financially. It was harder to justify a second bathroom and nine foot ceilings. But when the difference between selling a project and not selling a project is second bathroom and nine foot ceilings, you put in the nine foot ceilings and right bath right. You know, it's interesting. I think I'd see. I see that in a lot of successful businesses. Is there's a sense of planning of you know, we see this is the right way to go, but there's also a sense of you got to react to the market, and those that are successful can do both right and I think you've done a great job of that. You know, one of the things that's interesting, is got about about your business is that you can kind...

...of take your direction with a business model. You can either build this out and then sell it to an institutional investor or you can take it in house and operate. You know why? Both models? What led to that thinking? And is one better than the other? Yeah, that's a good question. I don't know that. I don't know that one's better than the other. I don't think that there is a either works and yeah, there's certain I'd say the model of building and selling repeatedly is simpler. Model of building and operating is more complicated and then requires additional typically would require additional equity requirement if you're going to hold, especially we're going to hold everything where we're we've evolved into a mixed model. I'd say for the first few years we were selling because we kept the project size kept growing and as a consequence we would require more equity. So you kind of build it and sell, get the equity in the profits out to do the next couple projects and we continue doing that for a while and it seemed like for a while we were purposely trying to stay at three or four projects a year, but we still needed more and more equity because of the project size grew. So right, you know, we when right. What I was eight years ago, our project size would have been. We did ninety six apartments in St Albert and we did a hundred and twelve and sunset valley and then you know our latest projects for two hundred and forty in west Cologna and two undred Nadian Cloona and and two hundred and eighty eight and Calgary. So the projects got bigger. So right, actually requirement would triple. So you kind of you know, a virtue of that we grew and it only was recently when we kind of reached the side. is terms of size and development. We've got our sweet spot of a hundred and fifty to two hundred or so apartments and doing for a year and now we're starting to keep about half. Because of the we can just...

...roll that the remaining half projects with the sale and profits we can roll into new projects and keep our volume going without having to raise anymore money. So that's really the you know, a bunch of things came together. It was that the formation of our private mutual fund trust to hold all of the new development stuff in. Then we created an entity to hold them in, which was a separate master limited partnership, and so now we have an entity to properly hold the man outside of the trust. Yeah, the whole thing is just really come together in the last couple of years. Yeah, very cool. Two questions up, Scott. First one is I love what you've done in terms of the net zero building and your philosophy on that. You also have a philosophy and in terms of bringing as many people along with you as you can. You've got, you know, all your employees have the opportunity to buy in. Can you tell me a little bit more about that? Yeah, for sure it we guess. My wife and I were the we were the beneficiaries of the profit sharing and share purchase program at West jet and that was always a you know, I think it was a it was a mantra that they would repeat it west. Yet all the Times that, you know, people wanted to benefit from their own success. There be a celebration of success and people would be able to participate in that as owners, and I think that's a big part of culture. It's not the only part of culture. It's, you know, Donn and I've talked about this a lot and and certainly you know, are the financial rewards, even if you say it's half and half. Well, a half half of your interest in wanting to act like an owner and be like an owner is your financial interest. That's great. The other half is obviously the culture and your manager and how well you get treated, empowerment and everything else. But we always wanted to have people who, if we were successful, they would be successful and successful beyond what they could have made elsewhere. If we're doing really well, we want to share in that and I think that really high streets started because of...

...the share purchase planet Wes Chet. It allowed listen I to save a hundred thousand and five years on not very high salaries, and we went around. We turned that hundred thousand into five hundred thousand on our first development. So it was that ability to to save that much money in a short amount of time and I really saw that as something that was passionate about and helping people. Do not that everybody's going to go and save money and start a company, but just help them with their own financial security, their own financial freedom and hey, if we're all making money, let's all let's share it and make money together. And you know, we've we've had a huge emphasis on trying to get our employees to invest significantly. So we actually to do we contribute fifty percent of up to twenty percent of their base salary in their investment also. Yeah, so if you think about you know, if your if you make Fiftyzero a year and you contribute to ten, we'll put in five for you. And that's out of our own pockets and not not out of the project money. It's from Melissa and I from High Street ventures. So we actually contribute directly to helping people save and the ideas that they then participate as owners and they get to benefit as owners. HMM. Yeah, the better you do, the better they do. Yeah, absolutely. And another third part we have is the profit sharing. So if really, you know, on space salary, the ownership and the profit sharing or bonus, which is again based on performance. So if we do well as a company, the bonus has been anywhere from ten to eighteen percent since we started. Ten eighteen percent of salary. Also, we and obviously the logical thing we do is when we pay all the bonus, we ask him to invest in and then they can get fifty percent more than that. So so it's it creates a hopefully, I mean I'd love for for people to you know, if they worked at high street for ten years. I always you can do the...

...math. If they work at high street for ten years and save twenty percent a year and we put in the fifty percent of that. And if they're diligent about that and leave it in in I always look at the numbers ago. Well, in ten years they'll be making as much off at that they are working there. So right it better be a good place to work, right. So that's always the logic. But I love that idea. I love that idea that people can can save and do well and have that option right, have that option to not work. If that's the salary you need, then have that option and and do well, because there's no reason we can't share it. That's fantastics. Got Thanks. So if there was any last thoughts you wanted to leave, you know, the listeners in terms of tips, lessons learned, you know, would there be one or something jump out at you, or a couple things? Yeah, I mean some of the biggest lessons for me that I tell entrepreneurs starting out that really be clear about what you want. I think dawn. Dawn was a fantastic mentor and I just wasn't the best listener in the in the beginning. And you know, and I should have learned the lesson that Qush yet to it was there was a big emphasis on on values. Now I didn't really get that. I guess wasn't paying close enough attention. But I think it's really important to know what you want in business and what what that means. And by saying that I mean clearly articulate your values and how you want the company to be seen and how you want your people to conduct themselves, and how you know how you want to be seen is as part of values and and figuring out what that is. In the hard part about figuring out values if you haven't thought about it, as you often come up with values by thinking about what you don't like rather than what you do like. It's easier to think about things that that you know, somebody pisses you off right and and see, so what is it about them that pissed me off? The opposite of that is what you value. Typically right, it's right. Yeah, sure,...

...what Piss me off about that interaction? I must like the opposite of that and therefore find the positive side of it, which is the value that you that you hold, and I think really important to nail that down, because it sounds wishywashy, but ultimately, any partnership that you have, whether it's your marriage or your business partner or whoever. If you if you have a fundamental disconnect on what you believe in and what you want to how you want to conduct yourself, you're going to get into a lot of arguments. Yeah, and save yourself the pain. Yeah, and if you don't really articulated and think of it proactively, you just end up somewhere, yeah, really place you want to be. Right. Yeah, absolutely, Let Scott. Thanks. Thanks so much. I really appreciate you spend the time of this today and continued success. Okay, thanks her. Awesome. And that was Scott Butler. See you of high street ventures. Inc I wanted to briefly revisit just a point from that interview. It was with that one was really a lot of fun for me. Scott was one of my very first students when I got into academia some twenty years ago so, so that was pretty special to me and one of the things that I love about Scott Story is, you know, around the idea of business models. I'm passionate about business models. I love looking at companies and figuring out their business models and how they've gotten to where they are and you can see how high streets business model evolved to really fit the opportunity, and Scott said that over and over again. But but you can also see that that was guided by his experiences. Experience in his family, is experience in school and is in experience at work. And you know, he was able to take that learning and evolve that and apply it and learn and evolve and apply and I think that pattern is you know, what sets Scott and many very successful entrepreneurs apart is that they're they're always looking for, you know, a great idea and how they can apply that in their situation, evolved it and make it great for them. So, you know, work for great companies, take from them, learn...

...from them, work with great people, take from them, learn from them and, you know, start great businesses. And I think all those things go hand in hand. So well done, Scott. You've been listening to the Ivy Entrepreneur podcast. To ensure that you never miss an episode, subscribe to the show in your favorite podcast player or visit IV dot Ca, a forward slash entrepreneurship. Thank you so much for listening. Until next time,.

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