Speaker 1 0:01

There is data and research that suggests that family businesses can be much more long-term thinking. You will have CEOs or boards that think beyond their own career. They're thinking in 40, 50, 60 year increments. So it can build businesses that are very healthy.

Speaker 0:23

Founders and leaders across Manitoba are building meaningful things, often quietly and without much attention. I'm Nathan Maertins. On the Building Manitoba podcast, I sit down with local founders and leaders to go beyond the surface. We talk about the values that drove them, the decisions that mattered, and the lessons they learned along the way. This podcast is for people who care about building something meaningful in Manitoba. Today on the Building Manitoba podcast, I'm talking with Calvin Polet, president of Neptune Properties, a Winnipeg-based family office managing over 1.6 million square feet of industrial, retail, and office real estate. Calvin didn't start out in real estate. He began his career as an entrepreneur, running a Dairy Queen and a car wash, before pursuing his MBA at the Asper School of Business. In early 2002, he partnered with his father, a lifelong entrepreneur who had built contracting and construction materials distribution companies, and together they started Neptune, which Calvin has spent nearly 25 years growing. We start our conversation with what a family office actually is, and why Calvin treats his tenants as customers, then spend much of our time on family business and what it takes to pass one on. We get into how he approaches succession, why the big picture questions come before the lawyers and accountants, and how good governance keeps a business healthy across generations. If you care about family business or building something meant to outlast you, you'll get a lot out of this one. Let's get into it. Calvin, welcome to the Building Manitoba Podcast. It's great to have you here.

Speaker 1 2:07

Thank you very much, Nathan. It's a pleasure to be here.

Speaker 2:09

Let's start with some of the basics. Can you tell me about Neptune Properties? What do you do and who do you do it for?

Speaker 1 2:15

I am the president of Neptune Properties. We are a local investment firm, essentially a family office. Our primary focus is commercial investment real estate, industrial retail, and uh office. The bulk of our portfolio is in the Winnipeg area, but we have assets uh across Western Canada. About 15, uh, 18% of our portfolio is in Minnesota. And we have some interests through our Neptune uh office in a couple of food processing companies based in Manitoba, one in rural Manitoba, one in Winnipeg. Also, I, as an entrepreneur, I uh have uh an interest in a couple of local Winnipeg-based uh self-serve car washes. Uh that my cousin is uh my business partner there, and he manages that enterprise.

Speaker 3:09

So for people who haven't heard the term before or aren't familiar with it, like what is a family office or how do you think about the family office structure and why did that model fit your family and uh all of your different business activities so well?

Speaker 1 3:24

I chuckle because uh you say for people who maybe are not familiar with the term, I did what I do for about 15 years before I even encountered the term. So for many years, uh it's become a more common and familiar term now, but certainly it's not completely widely known. So maybe I can illustrate with uh maybe a little bit of the history. I had uh started my career as an entrepreneur with uh a Dairy Queen with my cousin and then with uh car wash. Uh we got out of the Dairy Queen and uh had the car wash, but I was looking to find work uh employment elsewhere, and decided I needed to go back and upgrade my education by getting a master's in business, which I did from the uh Asper School of Business, the University of Manitoba. And upon completion, it was summertime uh when that program wrapped up, and it's tough to find decision makers who were maybe looking to hire uh people in the management field at that time. So figured, well, I'll I'll just enjoy a few more weeks of summer and I will wait for September to roll around. First week of September is pretty busy, so I wait for the next week and I let people sort of settle in on the Monday and then Tuesday. Okay, I I will get to work here. I'm I had a whole list of people I'm gonna call and I jump in the shower to start my day. And uh, as my wife was leaving for work, she pokes her head in the in the bathroom and says, Hey, uh, when you get out, make sure you keep the TV on because something just hit the World Trade Center. And it was September 11th, 2001. Yeah, it's nearly 25 years ago right now. And uh, as you can imagine, the world dramatically changed and the fields that I was looking in investment banking, banking field, that sort of stuff, finance, it was not a field that was actively hiring. So I had figured that I would give myself very serious and concerted effort at trying to find employment, and I would give myself until Christmas to to find something. And I promised myself that if something didn't happen by then, that I would go back to being an entrepreneur. Didn't know what that would look like, but uh that was the deal I made with myself. I knew that we were newly expecting um late April of uh two, we were expecting our first child, and I thought, you know, I want to be not still looking for something when that time uh and change in my life comes. So I got my last rejection on Christmas Eve, and the calendar flipped 2002, and I started looking for opportunity. And what happened at that time is my path with my uh father started across. I have a good relationship uh with my father and always have. And he had been a lifelong entrepreneur. He found himself newly unemployed in his early 20s, shortly after he had and my mom had married, and decided to start off as a uh roofer and quickly grew that business and then uh got into the new field of uh at the time it was a new field of drywall contracting and had established uh with a partner a drywall contracting firm and basically had been living a career as a serial entrepreneur and had had a fair amount of success at it in the uh early 70s because drywall was growing quite a bit, started importing a lot of drywall from the United States because he didn't like the distribution system that existed in Canada at the time. And long story short, ended up with a partner who led that company for 30 plus years. They developed a drywall distribution uh company that grew to 27 branches across Western Canada. It became Calgary-based across Western Canada and the U.S. And they sold that company in 2004. So enter uh my life again back in uh early 2002 looking for opportunity, and I didn't know what the opportunities might be. And one day, probably in January, my uh dad gave me a call and said, Hey, I've got an opportunity to provide some financing to uh a tenant. He had a small commercial real estate portfolio that he had uh slowly built up over the previous four or five years, and a tenant was needing to buy out a partner, and he said, uh, I'd be interested in lending the money, but the deal needs to get put together. A deal like that would normally have some sort of fee associated with it, what the industry would refer to as an origination fee. And I'm just looking for interest on my capital. So I put that deal together and got a consulting fee for it. And then another opportunity arose just a few weeks later. There was a home builder in the city that was looking for some standby financing. So I did that one, collected a fee. So, okay, I started building a little bit of a consulting opportunity here. But what I quickly realized was my dad had hit a certain point in uh life stage as a uh an entrepreneur. And this now is getting back to this question of okay, what is uh family office and how did you get into this position? And entrepreneurs as they are founding and growing a business or businesses generally have a similar experience, and that is that the business consumes their cash, consumes your cash at the beginning because you probably didn't have a lot of cash to start it with, and then it consumes it because it's probably not profitable on day one. And then hopefully you've got success and it's got some profitability, but then it will consume your cash because you want to grow it and you keep putting your capital back into it. But then as you mature as an individual and maybe lose some of your appetite for growth, maybe lessens, and as the business matures and starts generating capital that it maybe can't redeploy, you start ending up with some of that capital uh returning to you, either as dividends, or maybe you start winding uh up or selling off some operations. And now that capital uh needs its own deployment. And if you're at that stage in life, which for my dad at that point would have been around 60, you probably don't want to get into another active business. And you probably are not necessarily fully comfortable with the capital markets, the stock markets and such. So I, like all good father uh-son relationships, we started writing uh memos back and forth to each other. And uh I said, you know, let me write a proposal to put together a strategic plan because I just come out of an academic program where everything's about strategic plan and writing papers and such. And I said, What I think is going on here is there is capital that needs investment, and there's enough of it that it deserves to be sort of its own entity and to have its own focus as to what it's going to be invested in, and that there's some strategy to it. So let me write a strategy paper for this, which I did, and that was the creation of Neptune properties. The focus was commercial real estate, and part of that was that there was a small portfolio to build off of. There were, I think, four properties at the time. And my dad had construction experience. I had some experience that was applicable in terms of I'd had experience being a tenant, and I could relate to that experience and some skills that I developed through my schooling with um my master's in business and my undergrad in uh economics. And there was a gentleman at the time who uh worked as a consultant out of my dad's office who was uh an architect by training. So we had a really good fit to be able to understand the bricks and mortar and the legal and financial elements of commercial real estate. So we focused on that and started growing that real estate portfolio rather rapidly through acquisition and have been doing that for almost 25 years now. In 2005, started deploying some capital back into some private enterprise. It's kind of the private equity portion of our bit. So that is what a family office is. It has some kind of mandate to invest in some sort of to deploy capital and make it a meaningful investment. They generally, family offices will also exist to help family members who are associated with it, with ownership or whatnot, with maybe financial planning guidance or various things like that. We don't do a lot of that out of our office. We tend to just focus on the investment management piece and maybe some estate planning portions, but you can have some family offices that become very large and very significant. And ours is a in the world of family offices, a relatively small operation.

Speaker 12:14

Yeah, no, that's a great explanation, and the history on that is is really awesome to hear. I know, like with your experience, you know, as a dairy queen franchisee and running a car wash, can you talk a little bit about early in your career or entrepreneurial career? What did being a tenant and an operator of small business teach you now about being a better landlord and investor? And what are you taking away from those early days that you apply now?

Speaker 1 12:43

Well, for me personally, uh a characteristic uh for me is I think that I have a fair amount of uh empathy. That's just the way I go through life, which um I'm not trying to tout as a positive attribute. Certainly, empathy has uh some good attributes, but uh at times it can maybe slow down your decision making or or uh maybe uh have you not making the the best deals that that might be in your own uh best interests or things like that. But I'm an empathetic person and I have an appreciation for that, for being able to relate to what some of our tenants might be going through, especially our small business or owner-operated tenancies. We certainly have some tenants where uh it's part of a larger corporation and there's a large bureaucracy involved, but uh a significant portion of our real estate is occupied by operations that are owned by entrepreneurs. And to touch on that, I guess, with some specificity is when the uh pandemic hit in March of 2020, I recall writing a letter that I got our director of real estate to distribute throughout our tenancy network and through the property managers, the third-party property managers that we use. And I recall kind of putting a note in there, like I've I've uh had that experience of staring into the void, I think is the terminology that I used. I I know what it's like to have those tough and unfortunate days where you're sitting at your desk probably late at night because you're working incredibly long and hard hours and you know, asking these questions that don't seem to get answered of like, how am I going to make this work? Like I'm I'm up against the wall, I feel like I'm doing everything right and I'm not getting the results that I want. So that has helped me with that. And then also understanding with those experiences, Dairy Queen and Car Wash, and then part-time experience I had in my youth and such, I spent a significant portion of my time in service-related industries. And when I came into the real estate industry, it often felt like tenants were not really treated like customers. And I thought, you know, I think I'd like to bring a little bit more of a service focus to this uh rather than just, hey, we've got a lease and we're gonna tell you the way it is. Tenants are our customers, and our tenants in turn have customers their own, and you have to kind of think of all the way through that because if they're not able to service their customers properly because the real estate isn't serving them, then they're not gonna be successful. And in turn, that will have a negative impact on us as a landlord and a real estate investor.

Speaker 15:36

I'm curious what drew you to adding the private equity side. Like so you have like Prairie West Ice Cream and True North Foods, and what drew you to adding, you know, the operating business side in with the real estate? And how are those two sides working together, or are they just separate parts of your portfolio?

Speaker 1 15:53

Yeah, there's a little bit of crossover with with one of the operations into real estate. How did we get into that? In 2005, cap rates had really started to compress. So, cap rate, roughly speaking, is your kind of expected return. Mathematically, it is your annual rent out of a property divided by the purchase price or the value. And when I started in 2002, cap rates were about 10%, meaning the annual income was about 10% of what the value of the property was. And then they started to compress. So just like a bond, it's an inverse relationship as cap rates drop, values go up. And uh they were in like the 8% range. And we're like, wow, that is a that's a significant compression, and you know, real estate's getting expensive, and maybe we should look at diversifying. And we started looking for opportunities where we could invest and deploy capital, uh, and that would give us some diversification, but we didn't want to be involved in the day-to-day operations, and so we we were seeking an entity that would would require capital and maybe some board-level involvement as opposed to completely passive investment. We weren't looking for LP type stuff, and so we uh found that with Prairie West, which was a uh a startup at the time and and had had uh run into some struggles as so many uh things do, and an operating manufacturing company is uh it's a complex uh beast. So we came in as a capital partner and and grew our relationship from there. And they're located in a beautiful building in Winnipeg. So this is the crossover was uh we bought into there in 2005 and saw this beautiful building out near the Winnipeg Airport out on uh Oman's Creek and went, that is a gorgeous building and built by uh an Ontario-based pension plan. And the story that we heard was like, yeah, this thing is never gonna sell. It's it's owned by uh an institution as an investment uh great asset. And lo and behold, about three years later, they had built that building planning to expand their portfolio in Winnipeg, and they realized they were just not finding the opportunities available to them. So they decided to sell that asset, and we had an opportunity to buy it. We probably still consider it our trophy asset, and we would not have had that opportunity had we not been a tenant because the agent was instructed to market it very quietly and market it only to institutions. They did not want to seek a private investor, but we were occupying about 15% of the building, knew the building well, and knew that it was a great opportunity. So we we wrote a very uh compelling offer and they decided to work with us. So that's the one piece of crossover that our private equities had with uh real estate, and and it turned out quite well for us.

Speaker 18:42

That's a really cool story. And just coming down to more recent times, I know that you've been busy over the summer and just recently closed on a new acquisition. Can you maybe tell us a little bit about that and what drew you to the property, kind of your thesis behind it and and how things came together?

Speaker 1 19:00

Somebody asked me uh the other day, oh, what uh what attracted you to that property? And I said, well, it was for sale. Uh there's not a lot of great assets that uh have traded in in the last uh number of years or ones that have been a good fit for us. Uh the property you're talking about is uh Prudential Business Park. It was built in the uh late 80s. It has two industrial buildings, one of which faces the uh Century Street, which is the northbound traffic on uh Route 90, uh with a little bit of a some of the tenants in there have almost a retail kind of look to them, but it's uh it's an industrial building. There's another uh industrial building in behind it uh with King Edward Address and then two-story office building on the front. I have uh joked around that I've I've heard somewhere through the grapevine that apparently location is pretty important in the world of real estate. And everybody, all of your listeners would have heard the adage of location, location, location. And it's very true, location can make up for an incredible amount of shortcomings that any property might potentially uh have because it's just so so key to driving demand. And you have demand for your space from tenants, and tenants need to go where their customers want to find them. Uh and the location here is that it's uh in the St. James Industrial Park, which is uh still, I believe, by square footage, the largest industrial park in our city. It's two, maybe three kilometers from our international airport, and it is three blocks from one of the most significant retail nodes in uh Western Canada in the polar park area, certainly the most significant retail node in Winnipeg. So it's a great location. It had been institutionally owned by Artist Reeth for many years, and and they'd maintained it to a really good standard. So there were not deferred maintenance issues or weird leases or anything like that. It was full, the rents in there were uh appropriate. Uh the deal size for us was a really good fit. But artists had recently sold it, uh, just two months before we closed on it to a Vancouver-based entity that was acquiring a rather significant portfolio from artists. And this asset, for one or a variety of reasons, was not a fit for the portfolio that they were trying to build out and acquire. So as they were acquiring this, they um went to a local agent and said, Hey, we'd like to uh sell this one shortly after we acquire it, and do you have somebody who'd be a good fit? And uh the agent approached us and we said, Yeah, we think we'd be a good fit, and we think that property would be a good fit for us. And as chance would have it, it was the uh seller was somebody we'd actually done a deal with in uh Vancouver a few years earlier. So that uh that was a little bit comforting too. Very professional and upright entity there. So No one singular answer to why uh that property, but a variety of them. So yeah, location, it was full. Financial model was uh great. We uh we're excited for the profile that it offers. It's uh it's a visible property and we like taking care of our properties. So we're we're looking forward to being able to reflect uh pride of ownership as people uh drive up and down that street and take a look at how we're maintaining it and stewarding that property.

Speaker 22:26

You talk about a few things there that you you look for in a property, and I'm curious if you have any examples of deals that you've looked at that are maybe good on paper or checked a lot of your boxes, but you ended up walking away from them for other reasons. Can you talk about if you have any examples like that?

Speaker 1 22:42

I'll touch on one. I don't want to uh get too specific on it because I'd prefer the property to be uh for me not to single it out. This was about 20 years ago. The property checked a number of boxes, it was physically well built, it was uh retail, strip in nature, it had uh good access and ingress and egress. And I get along really well with my dad, and uh he was uh he's not very active in our business now, but a lot more active then, and and we were making decisions together. And we were not a hundred percent aligned on that property. He was he was higher on it than I was because he comes from a construction background, so he was quite excited for how well this thing was constructed, and it didn't have a lot of negatives in it. I had concerns for the location, and specifically, I I didn't think that the location was such that it would drive good demand for the tenancies that you'd want to try and get in there. And so in commercial real estate, your process is normally you go kind of through an offering process, deal gets agreed to, but you have some conditional period. Uh, and unlike housing, where maybe your conditional period is like 24 hours or 48, conditional periods in commercial real estate tend to be call it 30 days. Sometimes they might be longer. I think ours in this case was probably 30 days, and and you have an ability to really analyze okay, is this property a good fit or are there any significant surprises? So you go through a very thorough due diligence process. And as we went through that due diligence process, we did conclude that the location was just not strong enough, and the financial model that I had built for that was not holding up under scrutiny. The vacancy that there was some vacancy in the space, and I had assumptions for when that vacancy might fill up and what rent you might get for it. And we got through our due diligence process and said, no, this financial model won't hold. Those spaces will be vacant longer than we thought they would, and we're not going to get the rents that we thought we would, and rent won't grow over time the way we think it would. So that deal ended up not coming together. It's one of the very, very few deals that we've ever worked on that uh did not clear the due diligence hurdle because we don't like to put a property under contract and then not close. A, because we want to be known as somebody who does what they say they will. And if we say we want to buy a property, then we do want to buy that property. And B, it's a lot of energy to go through a due diligence process, energy and financial cost. And you don't want to be doing that without uh closing on properties. So yeah, we walked away from one uh in that example.

Speaker 25:32

Yeah, there's lots going on in that there. And I I know you touched on a little bit different viewpoints between yourself and your dad coming in. And I want to maybe talk a little bit about the roles that each of you has in the company, and I don't know if they've shifted over time as well, too. But you know, he's chairman and and you as president. And how did you set up those different roles at the start? And was there a process of figuring things out, or how did that evolve as you transitioned more of the management to yourself?

Speaker 1 26:01

Um technically, when I started the company, we actually have two companies, but the the Neptune Properties Inc., I was actually and still am president of that entity, but my business card didn't reflect that. I was in my mid-20s, and I thought, well, I'm I'm gonna have a little bit of trouble maybe having the credibility I want if I run around saying I'm president of a real estate investment company. So I think my first business card, I gave myself the title of uh asset manager. And it was back in those years when my dad was generally in the office every day and would be involved in in some decision making and such, uh, he tended to call himself coach. Uh so I was I was doing the day-to-day. It was a it was a small shop, so I was doing the accounting and I was doing the interactions with the uh property managers. Uh, the first couple properties that we bought in that first year, I was dealing with the leasing agents and doing the leasing and learning the legal on the fly. He was still dealing with the what we call the asset management decisions. Property managers were talking to him on the uh the other assets that we had. And then within a couple of years, I started getting into that. By nature, I'm a more detail-oriented person uh than my dad. So that fit well the detail end of things with real estate. I was working on that, and and he's a uh big picture thinker and and has vision. And his self-given title of coach was appropriate because it was a lot of sharing of wisdom. And he's still sharing wisdom all the time, or he's a sounding board for me. And most of the wisdom I've I've now heard, so I'm not getting too many new stories, but it's still always good to hear uh some of the stories uh again, and and I'm very thankful uh for all the stories I've heard because there's a lot of it's wonderful to draw on wisdom that's if you've got anybody relative or not in your world and your universe who can impart their experiences, their lived experiences, it's really valuable. So now with the role of uh chairman, uh he becomes a sounding board for me, or if there's a really significant decision that uh can have some sort of impact on us, I kind of want to get a little bit of sign-off on that. Not unlike how uh a leader of another organization who has a chair will do the same. You're handling the day-to-day stuff, you're in the you're in the forest and and you're bored or you're and and led by a chair is up at that 30,000 foot viewpoint, not in the not in the weeds. And one of the things that this gets into governance, and and you've got experience in governance as well, and it it applies to any uh organization, is your governance level needs to have that large view and be able to uh do it, but they need to try to understand how best to have that what is often referred to in governance as uh you get your nose in but your fingers out, because you can cause a lot of grief if you if you start really meddling in with the details, you have to have some trust in management, but also you'll be too disengaged if you don't have your nose in it, at least to have a sense of what's going on.

Speaker 29:22

How do you protect like the good relationship that you have in that father-son dynamic while still being able to have those frank business conversations or when there's disagreement and things? How do you walk that balance?

Speaker 1 29:35

I like that question. Um we have, I believe, had a really good relationship. Uh so part of it comes from just a parent-child relationship. Uh, I had a good solid relationship with my father growing up and how he was in my life and active uh as a father, and and you have a loving parent-child relationship. Some years ago, I asked a trusted colleague in the industry. This individual was a broker uh at the time, and I said, How do we relate to other people in the industry? And you've got other uh parent-child relationships or father-son relationships that you might be dealing with in real estate. And this is back when I might have still been in my 20s, maybe early 30s, still young. And uh he said, Well, when we're in conversation, uh, so he and I would uh my my dad and I would often be at a table together with a broker talking about a real estate opportunity. And my dad would say, Well, you know, here are my opinions on this uh property. And he goes, but Calvin might have a completely different set of opinions. And you know, he'd give his thoughts and then Calvin, what are yours? And mine might not match up with his, and and then we'd have dialogue. And he says, most of the fathers that I he in in his in this broker's case, he was referring to father-son relationships. He says, Most of the fathers I see say, Okay, you know, here's my opinion, and you know what now, what's my son's opinion? Actually, here's son, here's your opinion. And and there was not respect being given to the child's opinion. And I can't ever recall feeling like my opinion was not respected or valued. Uh, so I think that's one of the keys. And then the other thing kind of related to your question is we're also very comfortable debating with each other. And we were having some debate recently, and it was business debate, and one of my sisters was uh with us, and she and I had a conversation. Uh, I can't recall if it was still while my dad was uh in the room there with us or if it was later, but she was saying how she was kind of feeling some anxiety with the fact that it felt like we were going at each other. And I said, no, like this this was what we were doing to make decisions. And the opinions that I was putting forth in this particular discussion were not necessarily opinions that I fully held. They were opinions that I wanted to put forward so that he could refute them and that I could refute his. And by trying to put these ideas on the table and push them against each other, we could find the best or the most applicable truth. And uh just before we started the recording of this call, you and I were talking about uh maybe impactful uh books that uh we've read. And um somebody had given me a copy of a book, I believe it's called Scout, the woman writing it. I I can't recall if she has like a psychology background or what, but she talks about how for many of us we have what she refers to as a soldier mindset. And when we have an idea, we dig ourselves in, and it's about defending a position and maybe gaining ground, and this is how I'm going to argue with you. And in in military terms, a scout is somebody who goes out and tries to get a lay of the land and you're just picking up intel. And I enjoyed the book. I can't necessarily say that it's changed any of my viewpoints or my approach on life because I just feel like that's maybe the way that I've been brought up, that it's okay to have conflicting ideas. You you butt them up against each other, and then you're trying to find as much of the truth as you possibly can, because such a significant part of business is decision making. And if you're going to make decisions, you want to make them with the best possible information that you can, because very often the decisions that we need to make are not easy to make. It's not clear what the right decision is. And very, very seldom do you feel like you have 100% of the information available that you would like to have in order to make the very best decision.

Speaker 33:48

Yeah, and and having that opportunity to really debate things back and forth, that's good, that really sharpens your ideas and gives you that that feedback. So that's that's such a gift that you've got that ability to do that while still maintaining the respect between both of you and the respect for each other's viewpoints through it.

Speaker 1 34:05

Yeah, and carrying on on this family business theme and relationship, I came across an interesting thing. There was a memoir that my late uncle had uh translated. My dad and his family were uh immigrants from the Netherlands. So uh their mother tongue was the Frisian language. And my grandfather, who I unfortunately never had the opportunity to meet, he passed away uh a few years before I was born, had left some notes and diaries and such, and my uncle translated it. And I read a passage in there, and he was referencing his grandfather, which would be my great-grandfather, again, another individual I never met. He wrote, I started working with my father when I was 16. And uh I say working with and not for because it never felt like I was working for my dad. My my father respected how my thoughts, my beliefs, my opinions, and I thought, wow, I I could say the very same thing about the relationship with my dad, and it's uh it's fascinating. And this would have been, if it was 16 that he was referring to, this would have been uh 110 years ago, 1916, that he would have had that experience. So that experience of having uh a parent who says, Okay, I'm gonna respect you to make some decisions, and and at times you might need some guidance or have some wisdom shared with you, but to have that respect that you feel like you're working alongside and not necessarily uh completely subservient to is just the way we've operated, and it's felt very natural and it's felt very productive.

Speaker 35:41

That's incredible. I know you talk about business transitions or have talked about them before. I just want to ask you, too, like what are some of the lessons that you've learned through transitioning business and taking over parts of the business and building your own thing within the family business that other people need to hear? And what is some of your thinking around preparing for transitioning your business or how you'll set things up for the future within your own family?

Speaker 1 36:09

Um we're doing a lot of work trying to not necessarily prepare for a specific transition that's that's thought of, but to have a resilient organization that that can effectively function if if and when there is uh transition. You will hear in the world of family business people involved in the industry, maybe advisors or such, say that it's not uncommon that one approach is people talk to the current leader, maybe it's the founder or whatever, and hey, what happens uh like what happens in the next generation? Or is it expected that this asset or this portfolio or or whatever it is that this family business possesses is it expected to be passed down? And one approach is often that founder saying, Oh, you'll figure it out. And they just figure, okay, one day they they go into the Great Wide Open and then the the rest of the family sits around a table and and sorts it out. So that is one approach. Uh, that's an approach that I'm not fond of. I like to be a planner and I like to have some thoughts and I like to have contingency for if things go wrong or things don't go the way you want them to go. So discussion, relationship building uh amongst family members is important. In commercial real estate, you'll often see some assets come to market because the person who owns them would maybe like to keep them, but says, no, you know, I'm just gonna uh sell it because there's no next generation that wants to take this over. Uh there is a philosophy in a lot of family business that the business needs to be run by family, and that certainly is one approach. That's not the approach that I have. You can have outside management, and if you want to keep the enterprise within the family, uh you can still have family ownership. Uh, but if you have family ownership and you don't have family management, then you really need to have a strong understanding of governance. And even if you have family ownership and family management, you have to work on the relationship side of things. If that ownership piece is shared by family members who are not involved in that management, that they're going to feel like there's trust and transparency and honesty and all that sort of stuff going on with family members that are active in the family business. This is an audio podcast, so we we can't really work with videos, but if anybody is curious about family business and they're listening, I would uh encourage to do a quick search of the three-circle model. Uh that's a helpful um Venn diagram of understanding that you've got the family circle, uh, you've got the business circle, and you have the ownership circle. And uh often there's numbers applied to each area. You know, you've got people who are in the family, but they're not in the business and they don't have any ownership. You've got, in my case, somebody who's in the family, in the ownership, and in the management, uh, in the operation side of it. So I'm right in the center of the piece. And then you have people who may not be in the family, but they've got ownership. So that three circle model is a helpful tool to look at. It's it's very, very common in the that Venn diagram is very common in the world of family business. And to uh use that as a framework to go, okay, understanding the people in different parts of that circle are going to be bringing different perspectives. So as we started talking across generations and across family branches about things, we engaged with a family enterprise advisor. And that was one of the very first pieces of education we had is okay, here's a three-circle model, and understand that you're each coming from different places and perspectives and so on and so forth.

Speaker 40:17

How does governance fit into that? And how do you think about governance to make sure, like I know you touched on the importance of transparency and making sure that expectations are clear and aligned early on to prevent issues later on? What are your thoughts around governance and how you can mitigate any challenges and make sure that, you know, when there's transitions happening, you know, 10, 20, 30 years down the road, that people are are clear on things and there's the right tools in place that people can make good decisions and maintain relationships within the family later on?

Speaker 1 40:55

I'd say governance has a couple of uh elements to it. One is there's some element of structure, kind of a legal framework, if you will. You know, do you have a board of directors? How does that board get appointed? What is the board's role? What is management's role? And so that structure is about trying to make sure that people understand their roles, that they don't step outside of their roles and making sure you practice it. And then there's the human skills and the less technical, and this is not necessarily stuff that's put down on a piece of paper. It's the hugs and handshakes and going out for a drink together and making sure you've got each other's backs. It's making sure you know how to communicate effectively, um, make sure that you're not having back channel conversations, make sure that you have a sense of transparency and trust, that the structure works and that the right people are making the right decisions. I'm generally a jack of all trades, as you might guess from a career in fast food, car washing, beef processing, ice cream, and real estate. But um one area that I do feel like I've got some technical skill in is in the world of governance. I've had some good experiences in the volunteer sector, being on some very good and effective boards, and I've done the ICD program, which is a kind of the gold standard of governance education, and so I feel comfortable. Those are familiar waters for me to be in in the world of governance. A number of years ago, there was an article about a certain sports franchise that was going through some very difficult times. Uh, the performance of the team was very weak. It was suffering in the stands and the pocketbook and all sorts of things. And uh, this article that was analyzing what went wrong uh suggested that uh it all went wrong the day the board of directors chose to hire uh a particular general manager. I remember actually talking to my son, who was uh probably way too young to have any appreciation for governance, but saying this article is wrong. That is not the day everything went wrong. The day everything went wrong is the day the board thought its job was to hire the general manager. The board hires a president, and the president needs to be responsible for the general manager and oversee the general manager, and you hold the president to account, and that the board thought it was their job to go out and handpick the general manager. Well, how does that general manager answer to a president when you know if the president doesn't like the decisions the GM's making, the GM goes, Well, you know, I don't know that you're really my boss, you're not the one who hired me. That's not good governance. And the results in that particular case showed uh it was a disastrous time for that uh sports organization. So having a good structure, making sure people know their roles, making sure you've got Skilled people in that governance piece, uh, making sure that you have management that respects the role of governance and doesn't just ignore the fact that they should be responsible to governance, and then making sure that you've got the the continual work on the relationships, that you're scheduling meetings and uh making sure everybody's discharging their duties.

Speaker 44:21

How do you think about encouraging your own kids around following up their own path? And I know like sometimes there is the expectation, and you kind of alluded it to it earlier, and some some folks where they have a business and the expectation is that family follows in their footsteps. And you've alluded to, you know, there's there's multiple options. Uh, you know, you can bring in outside management as well, too. But how does a business leader encourage their kids to follow their own path without making the family business feel like an expectation?

Speaker 1 44:53

You know, that feels almost uh more like a parenting question than a business question. It's a it's a good question. Um there are a few interesting things I I have reflected on through the years in family business. Some number of years ago, I was at a, I was probably still a teenager. My dad brought me to an event uh with an entity that at the time was known as the Canadian Association of Family Enterprise Cafe. Uh, it's now the uh Family Enterprise Exchange, uh great organization uh that is kind of dedicated to making family businesses thrive. And there was a prominent member of a multi-generational family business that was speaking that day. Then there was a QA session. And I remember asking, there was just sort of this assumption in the conversation that family business was really important and family business mattered. And I didn't grow up, and my sisters didn't grow up necessarily with that mindset. There wasn't this mindset that there's going to be this business that you're going to be involved in. You know, maybe we worked some part-time or summer jobs and some of the things my dad was involved in. But in fact, the businesses that were around when I was a teenager, there is no ownership in any of those businesses anymore from our family. My dad got out of all of those things, and we've gone into a new path with this real estate. So I asked, okay, why family business? Is it better for the business or is it better for the family? Like, why does family business matter? And uh the response I got was something along the lines of, well, I think there was almost confusion that I would ask the question. And the and the response was along the lines of, well, I I guess you have to believe in family business. So that always stuck with me. And it stuck with me because I felt I still didn't understand why family business. So I think that's a helpful thing for families to think about. I think there is some good answers to help answer that. So why? Why is it better for the business? Well, there are a lot of um family businesses that have thrived for decades and for centuries, especially if you look even in Europe, where their business economy is much older than in North America. And there is data and research that suggests that family businesses can be much more long-term thinking. They're not going by quarter-to-quarter results. They're thinking you will have CEOs or boards that think beyond their own career span. They're thinking in 100-year increments potentially. Certainly, I'm sure they're often thinking in 40, 50, 60 year increments. So it can be very good for the business and it can build businesses that are very healthy for our economies and communities because there can be a sense of stewardship, there can be a sense of service if that's the culture of the business and the family. So it can be very good for the business. And it can be good for the family. It can create opportunities for family members that might not exist if that business wasn't there. Certainly if the business is financially rewarding, okay. Financial opportunity can be created. It can create maybe employment opportunities or experiential uh opportunities. So it can create uh opportunities. And one of the opportunities it creates is it creates the opportunity to bring people together where you go, oh, probably should get together with my cousins because we kind of need to function together, even if we're not involved in management or anything, like we we kind of have to get along. But if you have just regular familial ties and no particular thing, do you really have to go over to your siblings for holiday dinner? Or, you know, does it matter if you get along? You know what I could I could do without my sibling, or you know, so it can create healthy families. However, it can also create an awful lot of stress on families, like it's not all and always sunshine and lollipops, you know, and those challenges are well documented. So, what is the approach I take as a parent? One of the things I found interesting is I came across a statistic a few years ago, and I think it was a Canadian statistic, that a significant portion of family business owners believe that the purpose of their building of their business is to create employment opportunities for family members. And I found that fascinating because that's never been my experience as a child or as a business owner. So it's it's a belief and a shared belief that my wife and I have that uh and the way that we grew up, people have gifts and interests. And what is that gift and interest? And maybe there's an intersection with in the family, maybe there is not. And then that individual goes and pursues their own things. For me, I've always had an entrepreneurial bent. It's it's been a lifelong passion and and fascination of mine, and uh I could get into all sorts of entrepreneurial type stories from my youth. It's just been in my blood. And so for me, uh felt very natural. But I've got siblings who that was not in their mindset at all, or an appetite for risk, which you certainly should have if you're in business. If you've got a family member who doesn't have that appetite for risk, that's not going to be in the best interest of the business. Another mindset that I feel like I've grown up with and that we carry on is what is in the best interest of the business? And that business is kind of a living, breathing entity. It has stakeholders who rely upon it, certainly employees, generally, you know, one of your primary uh stakeholders to consider, but customers and communities and all these sorts of things. And if you just say, well, yeah, this business exists to be putting family members in in charge and having it run it, well, if they're going to run that business into the ground, man, you you've got a lot of collateral damage to something like that. So it's kind of a confluence, a coming together of my beliefs as a parent of allow your children to discover their gifts and and let them flourish, and a belief that what's in the best interest of the business. And that's helped guide my thinking and the way I look at the question that you posed.

Speaker 51:40

If another Manitoba founder came to you tomorrow and, you know, they're 20 years into running their business and thinking about how to pass it on to their kids or how to set it up for what comes after them in the next generation, what's the first thing that you'd tell them to do, or what's the first step they should take if they haven't started to think about it yet?

Speaker 1 52:01

I think the first step is to try and understand if you have alignment and really go to the big picture thinking. A lot of people will probably want to go and think about the technical aspects first. Oh, what should I do with shares? What would ownership look like? You know, would you rewrite a unanimous shareholders agreement? And I think I would encourage to have some bigger picture thinking. Do you have family members who would want to be associated with the enterprise in ownership and or management? Do you want to pass on what you have created here for your children and generations beyond? Because certainly one element that exists for somebody who creates wealth through a business is you can liquidate it and just consume it all yourself. You don't necessarily have to pass it all on to your children and grandchildren. Uh, that's an option that exists. So put some thought into if that's an option you'd want to take. And if not, then why and how would you do it? A helpful visual or analogy that was presented to me when we started working with the family enterprise uh advisor was he said, imagine that your family is on a ship and you've got the whole horizon in front of you. You've got water as far as you can see, kind of in all directions. Where do you want to go? And where do you want to go and why? And have some conversation and decide on that. And once you figure on that, like, hey, I know out in that direction is some islands and it's a climate that we want to go to and has resources that we want, that's that's where we want to go. And everybody says, yeah, we're literally on board this ship. We're on board for that. Well, then what you do is you set your sails or you set your rudder and you set your motor. And all of those things below the line, your your rudder and your motor, are what help you go in that direction. And the above-the-line thinking is where a family enterprise uh advisor often will will work and place themselves, and it's about the alignment and the communication. How do you decide on where you want to go? And the stuff that happens below the water or below the line of that horizon is below the water, is the world of the accountants and the lawyers, right? They they tell you how that engine's going to run and and uh at what speed it should be running and that sort of stuff. So I say the perspective that I would give somebody who says, Hey, what do I do? I would say start with that above-the-line thinking. Get the people around the table. Are these people that have the ability to be around the table? Uh families are complicated. And like if you can't even get the people around the table, um, then it would become clear that your first step is to put the skills and process in place to be able to get people around the table. And then once you do that, then you start that conversation. And once uh that conversation takes place, you have an idea of what your vision is and you can start going in that direction.

Speaker 55:06

That's great advice. Before we wrapped up the conversation here, I just wanted to ask too like you've operated your whole career here locally and you own properties kind of other provinces in Canada and a little bit in the States as well, too. But what is it about doing business in Manitoba that you find is underrated by people who look in from the outside?

Speaker 1 55:26

I think that Manitoba is a great place to do business, and it's the people. I think one of the reasons why people here are there's something special about it, is uh I think our cold weather helps make it that way. With a climate that can be inhospitable for a good portion of the year, you better get along with people. You better get along with friends and neighbors because life will become very lonely if that's not the case. We don't have the ability to just every weekend decide to go mountain biking by ourselves in the middle of January. We're getting together for house parties and socials and we become very friendly. We maybe have to push each other out of a snowbank or shovel an elderly neighbor's sidewalk, you know, so it creates some of those opportunities to serve each other. And then because not everybody can handle a climate like this, um, you tend to grow roots when you stay here. And when you've grown some roots, there's a an interconnectedness within the community. We are not a transient community. You go to some other cities across North America, for example, and you go to a reception or a dinner party, and and a significant portion of people uh don't have roots in that community, and they've they've gone there for opportunity or whatever. And and that's that's not good or bad. That can be very exciting and wonderful, and and you've got a spirit of adventure in communities that that maybe is more prevalent there than in a place like this. But the best description I've ever heard of Winnipeg, and I wish I could remember who said it, but somebody once said in Winnipeg, you have to round up to get to one degree of separation. And there's this concept of six degrees of separation. If you don't know what I'm talking about, look it up. It's a it's a fairly well kind of thought out, documented thing. But in Winnipeg, if you are talking to somebody that you have never met, and if they have roots in this city, it's very, very rare that within one minute you would not be able to find some common connection, a common relation, or where you both know the same individual or you worked at the same place or anything like that. And when you have that, if I'm allowed to use uh certain colorful language, it's very difficult to be an asshole in a community that is that tight-knit because it will come back and bite you because somebody will say, Oh, I'm trying to do business with so-and-so. And right away, lo and behold, somebody will know them and go, Oh, you know, you can't do that. They're they're not a good person to deal with. So it keeps us honest, keeps us friendly. And part of where I started learning and discovering this phenomenon is when we started doing business in Minneapolis and the Twin Cities in Minnesota about a dozen years ago. We're friendly Manitoba and they're referred to as Minnesota Nice. And they they share these common characteristics, uh, a climate that gets kind of harsh, and a population that's not uh very transient. So it's for me a very comfortable and wonderful place to do business. And yeah, it just it feels like uh home. And the vision of our company from day one has always been relationships, pride, and growth. And it's not for coincidence that the very start of that vision is relationships. Relationships just the way I grew up and the way I watched my mom maintain relationships and and host people. Both my parents came from very large families, and her ability to host people and care for all these great nieces and nephews that were being born, really wonderful things. So, relationships has been the foundation of our strategy. And Winnipeg is an outstanding place for relationships. And if I can expand on that just with a couple of more specifics, you will often hear that in Manitoba, the relationship between governments and business community is better than in many other places. And that's regardless, for example, of the provincial legislature, regardless of which political party is in power, that our leaders feel maybe a little bit more accessible. And usually it's because you know, you know somebody who plays in a beer league hockey league with the premier or something like that, right? And then the relationship with the business community and the Asper School of Business. Um, if you're if you ever have familiarity with like the associates, and time and time again, uh, when they go through their accreditation process and such, and they have people evaluating that business school from outside of Manitoba, they say, wow, this relationship that your school has with the business community is outstanding. And it's this is an economy that is really driven by relationships.

Speaker 1:00:18

I love that answer. Thanks, Calvin, for coming on the Building Manitoba Podcast. I've really enjoyed this conversation, and I think people are gonna get a lot of value from it.

Speaker 1 1:00:26

Thanks a lot for having me, Nathan. I appreciate uh the opportunity to be here, and best of luck to all of uh your listeners and in whatever their uh endeavors are doing. I appreciate the time anybody might have taken to listen to what we had to say today.

Speaker 1:00:40

Thanks for listening to the Building Manitoba Podcast, and thanks to everyone who's been sharing the show. If something here stuck with you, send this episode to one person who'd want to hear it too. See you next time.