The Entrepreneur Podcast
The Entrepreneur Podcast

Episode · 1 year 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 ibion tofenertiapod cast from the PRL morised institute, Fronto Menorship at the AvyBusiness Gool, my name is Eric. Morrs and IILL be your host for this episode.For the past decade, Scott Butler has been the founder and CE O of HighStreet ventures, INC, a real estate developer and one of the hottestmarkets in Canada. Here Scott retracing his entepreneurial journey. Well, westarted doing real estate development when I left West, yet my wife and Idecided to start or own business. That was at the end of two thousand andfour and just so happened that one of the cofounders of Westyet Don Bell toldme when I was leaving that he wen back whatever we started so gave us the confidence to go out thereand find something didn't know we're going to e realestate at the time, but that ended up being the top of the list Hehad aboutten things that we were thinking about doing and that real estate developmentcame out on top, so kindo came by. Naturally, I guess my dad had aconstruction company when I was growing up and my my brother was doingconstruction for other developers, so t seemed like a natural fit to play thedeveloper role and and go out and start doing real estat. So it wasn't. I meanit was familiar to you y. You kinda had a sense of what it was all about. Youthought you could take that on, but your business model was a littledifferent. Tell me a little bit about that yeah oddly, it wasn't thatdifferent. In the beginning m. We didn't have the plan that we thenembarked on later. I think the in the early days it was just a matter ofsurvival and and trying to find opportunities. You know making a making a business for yourself. Ididn't have any employees at the time it Woas just get out there and try toget a prodict going and our first one was a condo project in Courtney. Isuppose, even at that time we had the idea around doing repeat buildings, sowe knew that that was a primary concept...

...that we wanted to apply, which was, Isuppose, similar to the wested philosophy of the same aircraft typeand efficiencies you get out of that. So we knew that if we repeated the samebuildings, it would become more efficient and we'd get better at it.Even on our first sight we had three buildings and they were all identical,so that was certainly an early mandate and then it wasn't until the Downturninin two thousand and eight that we really got onto the current model, andthat was Um and again kinda happened. Tons it wasn't, there was there. wasthere wasn't a big master plan? It was just gain. We were survival, it was HoweaHaw, he had turned. We had some early success on the first prodect and thenbuilt a hotel and had to sell that we're the only hotel, sale in BC and and in two thousand and nine it S. Wer, the only hotel, saleand Um sometimes were a little difficult and it was really acombination of my brother had done a lot of construction for rentalapartment developers and we always I was always interested in that model,and I always liked it, but couldn't figure out how the numbers worked untilwe did the hotel and there was a big epiphany when, when we did thePROFORMAS on the hotel and e looked at takeout financing on the hotel and ofcourse you build with financing based on cost and your takehous based onvalue and all of a sudden we realized, you could take out a bunch of equitythat you'd put in initially, you could take it out once the building's fulland cashflowing, and then the numbers made sense. Then the numbers couldactually get you double digit returns to the point where it made sense toactually split the difference. You know it's actually split so that, as aspeople that ere running the development, we could get a margin out of that andstill have enough leftover for the investors, and it was really the hotelthat led to that of Piphany, and then it was oh hey. We can do this withthrental apartments and then started...

...going gagbusters on rental part, and soonce you started ren rental apartmements, the rest of it was likeyou said you had the epiphone, but the rest of it was more kind of graduallearning. Hey if we do the same structure repeatedly we're going to getbetter at it, we're going to lower prices. You know tell me a little bitmore h. How did the business model evolve? Yeah for sure it was in thebekinning, it was literally looking at what other developers were doing andand sa well there's a there's, a model that we could follow. You know twobedrooms predominantly and they're all two bad one bath of the time for rental,and you know pretty basic building. We called it version. One Point: Oh, wehad. We actually went into markets like yellowknife. Ithought we were going to e rental and sold them as condos and Um. That was aneye opener as well just the ability to pivot to Condo. If there was anopportunity but not focus on Condo, so we've wee still done a fairamount ofCondo in our past, but Um. Not We don't go into markets. Thinking we're goingto Ducondo. It's SRY were your billy proposition's. Interesting though,because it's apartments is what you go after, but it's it's a nice. It'salmost condo level, oh yeah, it's Avolor the years for sure I mean we'renow we're we can easily transition between rental and Condo of the marketdictates. So it's yeah we're it's too bad too bath courts, countertot,stanasteel appliances, allriahy! You couldn't tell the difference betweenwhat we build in a condo other than our it's actually more energy efficient,but right and that's involved as well right in terms of part of the businessmodel, the value proposition for people coming into these apartments. It's whenit's high IG end and two: It's h. You know really energy efficient. You guysjust recently won a number of words. Tell me about that Y H, absolutely wellpart of it. I suppose the we've got a goal to have a thousand net zero homesO that we own an operate by the end of twenty twenty four and Um. Thatprobably became more from philosophy,...

...but we also recognize that there's athere's, a payback there m 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 ofthese energy efficiency improvements pay for themselves and more so for usit was. It was about math and we are willing to spend beyond puremath on making it more efficient. Though, and and help you know, push theindustry in in what we think is allogical and and correct direction,both from a financial standpoint and for doing what's right, but in the early days there wasn't. Therewasn't as much push on that. Certainly the hotel we built had a lot of energyefficiency built in D and water savings and everything else, but it did take awhile to come back to that. I think once we really figured out where wewere with the product, it gave it and then the kind of independence ofthought through changes in in our structure and our partnership structure.It was really about what do we want to be known for and how are we going to Um?You know what change are we going to make in the industry and that reallyled to to the net zero vision term, the product itself? A lot of that wasresponse from the market, pushing where we were to go in the beginning, and youknow when we first started doing this in two thousand and nine, there wasn'ta lot of competition and so no matter what you built in Alberta T, it wouldfill up and you'd be competing against much older product that was built inthe seventies or eighties, and there wasn't a lot of new and then, as thatchanged over the years. You'd have a lot of Condo bilders that entered themarket in the rental space and and that created anuptick in in the level. We also got the feedbackfrom hinstitutional buyers that I remember specifically, we had in thedownturn in Alberta, one of our...

...projects that we did there. We wantedto sell it and it was after the downturn, so aft post as it was earlytwenty fifteen and we had what we thought of the timewere great layouts. We had you know two bedroom, one bath, dining room courts,countertops damsteal appliances, so he pushed kind of everything else in thatdirection. The underground parking everything else and we fullyunderground. We, I think about three or four years ago, we t started doingeverything with underground parking, so we thought it was. It was a really goodproduct and the institutional players balked, because they said they wantedtwo bad two bath and nine foot ceilings and we had eight foot ceilings, and soyou, in, in a time of of you, know having to sell the initutional buyershad 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 mennded up selling to aprivate company, not an instutional Baron, I and the price suffered forsure as a result, so so Kinda, some of these changes get forced on you through.You know you get beat on the head with with Oky. That's what the marketdemands now, whereas you know it's not always brilliant, where you just yourealize it when you, when you're in a bit of a crisis that Oh crap, that'snot what we should be doing anymore, and so you just make the change withouteven F, not the financial consideration. 'cause you couldn't financially. It washarder to justify a second bath through nine fooceilings, but when thedifference between selling a project and not selling aproject is second bathroom and Ih: U ceiling you you put in the ninefootstaling a you know. It's interesting, I think I'd see. I seethat in a lot of successful businesses is there's a a sense of of planning ofyou know. We see this is the right way to go, but there's also a sense ofYouve got to react to the market, and those that are successful can do bothright and I think you've done a great job of that. You know one of the thingsthat's interesting's got about about...

...your business is that you can kind of take either directionwith a business botte. You can either build this out and then sell it to aninstitutional investor or you can take it in house and operate. You know whyboth 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 betterthan the other Um. I don't think that there is a either works and yeah. There's certain I'd say the modelof building and selling repeatedly issimpler. Model of building and operating is more complicated and thanrequires additional typically would require additional equity requirementif you're going to hold, and especially if e're oing NAO hold everything wewe're. We've evolved inknow mixed malel I'd say for the firt few years we wereselling because we kept the prodect's eyes kept growing and as a consequence,we we would require more equity. So you kind of build it and Um Se ill get theequity an the profits out to do the next couple of projects and UH. Wecontinued doing that for a while, and it seemed like for a while. We werepurposly trying to stay at three or four projects a year, but we stillneeded more and more equity because of the product. Size grew Soyou, know when wh it was eight years ago. Our projectsize would have been. We did ninety six apartments in Saint Albert and we did ahundred and twelve and sunset valley, Um and then you know our latestprodects were two hundred and forty in west Calona, N, two hundred and eightyin Coluna and and two hundred and eighty eight in Calgari. So theproducts got bigger, so aey requirement would triple so you Kinda, you know byvirtue of that, we grew, and it only was recently when we kind of repreachedthe size terms of size and development. We've got our our sweet spot of Ohundred and fifty to two hundred or so apartments and doing for a year and nowwe're starting to keep about half because of the we can just roll thatthe remaining half protects with the...

...sale and profits. We can roll into newprojects and keep our volume going without having to raise any more money.So that's really the you know a bunch of things came together. It was thatthe formation of her private mutual fund trust to hold all of the newdevelopment stuff in then we created an entity to hold them in which was aseparate master, limited partnership, and so now we have an entity to toproperly hold the man outside of the trust, yeah the whole thingis just acome together in the last couple of years, yeah very cool two questions:I've got the first one is I love what you've done in terms of the net zerobuilding and your philosophy on that. You also have a philosophy in terms ofbringing as many people along with you. As you can you've got. You know all your employees have theopportunity to buy in. Can you tell me a little bit more about that yeah forsure we um? I guess my wife and I were the we were the beneficiaries of thePROFITSHAR ING and Shar purchase program or West jet, and that wasalways. You know I think it was. It was a mantra that they would repeat it westshed all thetime s that you know, people wanted to benefit from their own success. There'dbe a celebration of success, and people would be able to participate in that asowners, and I think that's a big part of culture. It's not the only part ofculture. It's you know Don, and I have talked aboutthis. A Lot D, and certainly you know, are the financial rewards, even if you say it's half and half El,a half half of your interest in in wanting to act like an owner and belike an owner is, is your financial interest? That's great. The other halfis obviously the the culture and your manager and how well you get treatedinpowerment and everything else, but we always wanted to have people who, if wewere successful, they would be successful and successful beyond whatthey could have made elsewhere. If we're doing really well. We want Tashare in that, and I think that really...

...high street started because of thisshare purchase plan Ond Westet. It allowed lessen I to save O hundredthousand and five years on, not very high salaries, and we went around. Weturned that hundred thousand andto five hundred thousand on our firstdevelopment, so it was that ambility to to save that much money in a short amount oftime, and I really saw that as something that was passionate about andhelping people do not that everyony's going to go and save money and start acompany, but just help them with their own financial security, their ownfinancial freedom and hey. If we're all making money, let's all, let's share itand make money together, and you know we we've had a huge emphasis on tryingto get our employees to invest significantly. So we actually do m. Wecontribute fifty percent of up to twenty percent of their base salary intheir investments, also yeah. So you think about you know if you'R E you're,if you make fifty thousand a year- and you contribute to ten well we'll put infive for you a and that's out of our own pockets and not not oother projectmoney, it's it's from Meliss and I from high street venture. So we actuallycontribute directly to helping people save, and the idea is that they thenparticipate as owners and they get to benefit his owners. Mhm Yeah, thebetter you do, the better they do, yeah, absolutely and n. The third part wehave is the profit sharing so really Y. U know its base salary, the ownershipand the profit sharing or bonus which is again based on performance. So if wedo well as as a company, the bonus has been anywhere from ten to eighteenpercent. Since we started ten to eighteen percent of salary, also, we UHand obviously the logical thing we do is when we pay all the bonus. We askHem do ing best and Y and then the a get fifty percent more than that. So soit's yeah, it creates it. Hopefully I I mean I'd love for for people to youknow. If they'v worked at High Street...

...for ten years, I always you can do themath if they work at high school for ten years and save twenty percent ayear, and- and we put in the the fifty percent of that and if they're diligentabout that and leave it in, and I always look at the numbers- a goone in ten years, they'll be making as much off hat as they are working thereso better be a good place to work. RITHAT's, always the logic, but I lovethat idea. I love that idea that people can can save and do well and have thatoption. I'd have that option to not work. If that's the salary, you needthen have that option and do well because there's no reason we can'tshare it as fantastic got things. So if there was any last thoughts you wantedto leave, you know the listeners in terms of tips. Lessons learned, youknow, would therebe one or something jump out at you or a couple of things.Yeah. I mean some of the biggest lessons for me that I I tell entreper starting out that Um really be clear about what you want. Ithink dawn dawn was a Fantasti mentor and I just wasn't the best listener inin the beginning and UH. You know, and I shourt ave learned thelesson at west. Cet Too it was. There was a big emphasis on on values. Nowdidn't really get that Um, I I guess, wasn't paying close enough attention,but I think it's really important to know what you want in business and whatwhat that means, and by saying that I mean clearly articulate your values andand how you want the company to be seen and how you want your people to conductthemselves and how you know how you want to be seen is a is part of valuesand and figuring out what that is, and the hard part about figuring out values.If you haven't thought about it, as you often come up with values, byt thinkingabout what you don't like, rather than what you do like it's easier to thinkabout things that that you know somebody pisses. You off right in andsee what is it about them that pissed me off the opposite of that is what youvalueyicaly right: Sure what Piss Meowo...

...that interaction! I must like theopposite of that and therefore find the positive side of it, which is the valuethat y ou that you hold and I think, really important to nail that down,because it it sounds: wishy washy, but ultimately any partnership that you have, whetherit's your marriage or your business partner, whomever if you, if you have afundamental disconnect on what you believe in and what you want to, howyou want to conduct yourself you're, going to get into a lot of arguments hand save yourself, the pain and, if you don't really articulate it and think ofit proactively, you just t end up somewhere, yeah Yo have a g place. Youwant to be right, Yeh absolutely most got thanks! Think so much. I reallyappreciate you spending time with this today and continued success. Okay,thanks her, and that was Scott Butler CE OF HIGH STREET VENTURES INC. Iwanted to briefly revisit just a point from that interview. It it was uh thatone was really a lot of fun. For me, scout was one of my very first studentswhen I got into academia some twenty years ago, so so that was prettyspecial to me and one of the things that I I love about. Scott Story is,you know around. The idea of business models am passionate about businessmodels. I love looking at companies and and figuring out their business modelsND and how they've gotten to where they are, and you can see how high street'sbusiness model evolved to really fit the opportunity, N and Scott said thatover and over again, but but you can also see that that was guided by hisexperience, his experience in his family, his experience in school andhis inexperience at work, and you know he was able to take that learning andevolve it and apply it and learn and evolve and apply. And I think thatpattern is you know what sets Scottn many very successful. intprenters apartis that they're they're always looking for you a great idea and how they canapply that in their situation, ofvalve it and make it great for them. So youknow work for great companies. Take...

...from them, learn from them. Work withgreat people, take from them, learn from them and you know start greatbusinesses and I think all those things go hand in hand so well, Donescottyou've been listening to the Iviongmin or potcast to ensure that you nevermiss an episode subscribe to the show in your favorite podcast player, orvisit ivy dot ca forward, slash entremrenorship! Thank you so much forlistening until next time.

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