Richard DeGroat was never one to shy away from a challenge. Raising the bar has been a way of life for the chief executive of CareVest Capital, a Calgary-based real estate lending and investment management firm.

As a history major at the University of Waterloo in the 1970s, DeGroat initially aspired to be a history teacher but eventually switched gears and set his sights on becoming a lawyer.

After practising law for 15 years, DeGroat ultimately shifted his career into overdrive with a move into the investment industry, first with Tom Capital Associates and then with CareVest Capital.

So what's the next challenge for the 49-year-old, who has transformed a small family real estate investment management business with $1 million in assets into a major Canadian player that manages more than $130 million in assets, including numerous properties in British Columbia and Alberta?

Dave Olecko, Business Edge
CEO Richard DeGroat has transformed CareVest, a small family real estate investment management business, into a major Canadian player.

Well, DeGroat isn't very good at tipping off the competition.

Which should, at the very least, make his law professor proud.

1. Who was your childhood mentor?

"The person, frankly, who influenced me the most in my youth, although I probably wouldn't have said it at the time, was my stepfather John Hunter. He came from very modest means, became a chief of police in our hometown and later on built a pretty successful business. He was tough as nails and yet he had a great ability to understand people and work with them. It's tough managing a relationship between a stepfather and a stepson, and I wasn't any great help in that area. Yet, he set a great example for me. He's the hardest-working guy I ever met."

2. What was your first job as a youngster?

"I worked since I was probably 13 or 14 during breaks from school. My first job was laying sod and it was a job that entailed long hours. You needed a strong back and a weak mind, so I fit in perfectly."

3. Why did you pursue law as a career?

"Originally, when I was going for my BA in history and thinking of being a teacher, it became clear to me that being a history teacher wasn't going to meet all of my competitive needs. The professorial life of a history teacher just didn't have the glitz for me."

4. Why did you move from practising law to the investment business in 1995 to start CareVest Capital?

"CareVest was founded for the purpose primarily of putting out personal money that was available for loans. It was originally run as a very small sideline business for the first four years of its existence. Then, in 1998, I saw an opportunity because of changes in the financial industry to step in, take a role as the CEO and drive the company to where I thought it could move. There was a consolidation in the banking industry at that time and a reduction of traditional sources of capital to Canadians, particularly in the real estate sector. At the time, real estate was not particularly in favour (for raising capital)."

5. How has your legal background lent itself to the business you're in now?

"It fits well from a technical point of view. More importantly, it helps with approaching and solving problems. It helps in identifying the issue and then applying techniques to solve that issue."

6. How would you describe your investment philosophy?

"Well, at CareVest we're very much a 'measure twice, cut once' operation. My personal style is to ask a lot of questions. We look at issues from a wide number of angles and we do our homework. There's just no substitution for taking the time to do your homework. We've always tried to provide a product that is a conservative lending investment and we've got a pretty good track record of providing consistent and stable returns over the past 11 years. We've grown steadily since 1998 by using some basic rules. We've grown very methodically. It's been a very measured, controlled and planned growth."

7. What are the key differences between the real estate markets in Alberta and B.C.?

"We're kind of careful about what we say about the differences from a competitive point of view. The primary difference in those markets, from a functional point of view, is that in Alberta you tend to have an almost unrestricted availability of land base while in B.C., particularly in the Lower Mainland, you don't have that availability of land. That's a significant constraining factor on the market."

8. Of the markets you invest in, which currently has the most favourable buyer's market?

"That probably depends a lot on the product type. The Toronto condo market is probably a slightly better buyer's market because of some of the pressures there. The Alberta market is probably the best balanced market because in most of Alberta's markets, with the exception of Fort McMurray, there's a ready supply of product that tends to balance out the demand factor. In Fort McMurray, there's no way that supply is keeping up with demand and that's creating a very difficult buyer's market."

9. What's your outlook for the Canadian real estate market and do you believe a real estate bubble may be forming, as some experts have warned?

"I think the market still has solid fundamentals behind it in terms of product demand, demographic changes and interest rates. Of course, each market has different strengths and weaknesses. From my perspective, we pick the best loans wherever they're located. A bubble tends to be a situation where you have some artificial factors forcing prices to rise dramatically. Given the availability of land base and the penchant of builders to build if there's available product, I don't think there's any reason to believe there's a massive bubble. Certainly, there's pressure on pricing and there have been some dramatic moves in pricing. You're starting to see moderation in pricing and inventories moving up slightly. You're also seeing some buyer resistance to pricing and that's putting some brakes on things."

10. Are you concerned about the prospects of rising interest rates?

"We don't know, frankly, which way rates will go, but our loans are relatively short term so they readjust interest rate changes over the short term. We're still at historically low interest rates, but the fact of the matter is that our availability of good product was just as available when rates were higher than they are now "From the market niche we're in, any movement of rates up or down within reasonable bands is not going to be a factor. Of course, if the prime rate goes to 20 per cent, all bets are off."

11. Is your business designed to excel in positive and negative market conditions?

"Yes. We fill a niche where we can lend in good times or bad times. In poorer times, not a lot of economic activity ceases but sources of available capital do tend to dry up. Right now, there's lots of available capital and in many cases people are assuming they can't go wrong by putting a loan against a piece of real estate. Well, that's not necessarily the case."

12. What's your long-term vision for CareVest Capital?

"We will continue to grow and fill in market niches where we can add value and where there's a good customer demand. To this point, the company has grown pretty much directly on plan. The market has unfolded the way we thought it would, except for some twists and turns that are to be expected. Our business volume since I took over as CEO has grown by about 7,500 per cent and assets under management have grown by about 2,600 per cent. I think we have some interesting additions that we can do within the CareVest family within the next few years. I can't be too specific about them from the point of view that we don't mind being copied, but we'd like to be copied a couple of years late. People will look at you and try to emulate what you're doing."

13. What do you enjoy most about running this company?

"I have terrific people that I get to work with and, quite frankly, learn from on a regular basis. We've got great people that I'd stack up against anybody in the business. I also quite enjoy the opportunity to deal with our clients, both on the investor and borrower side. We have the good fortune in this business to meet a lot of very interesting people, and, at the end of the day, that's where the most fun is."

14. What sets your company from others in this space?

"There's a lot of things but, if I had to pick one, it's the depth of people skills and talent. We have very clear checks and balances through our systems, very well-identified roles and a wide range of skills sets, including legal skills, accounting skills, appraisal skills and so on."

15. What are you personally investing in these days besides real estate?

"From an investment point of view, the business is my primary focus. There are terrific opportunities in this market and you need to keep your eye on the ball."

16. Do you see yourself running this business long term or do you plan to slow down in the next few years?

"It's not my nature to slow down and I'm not the retiring type. I'll be involved in business activity until they close the lid. As far as this business in particular is concerned, I expect to be involved - and whether that's as the CEO role or another role doesn't really matter to me. At some point, as the company grows, maybe there would be a need for someone who could add greater value to the company, maybe a more managerial type or something of that nature, and then we would make the appropriate changes."

17. When you reflect upon your career in law and business, is there one thing you'd change if you could do it over again?

"It's just human nature to look back at some things you'd do differently. But the reality is that I am where I am because of all those experiences that are bad. You learn just as much from the bad experiences as you do from the good ones. No, there's not a lot I would change."

18. What's the most important lesson you've learned in business?

"I think that the fable and proverb writers had a lot of good ideas and most of the management guru writers are pretty good at slogans, and not much more."

19. Who's the entrepreneur you most admire?

"I've always had an admiration for Jimmy Pattison (the billionaire owner of the Jimmy Pattison Group) who I've never had the pleasure of meeting. You certainly have to admire what he's built, I like his style of business and I like the fact that he seems to be a decent fellow. He has built a very solid operation and he has done it in the private context."

20. How do you define success?

"You can measure it in so many ways. What really counts at the end of the day is your family. What's important is whether you've done the best you can with your family and raised some new people who have character and integrity. I have three boys in their late teens and early twenties. I spent a lot of time with them when they were growing up. Besides being my sons, they're great personal friends of mine. That's got to be the best measure of success."

IN PROFILE: Richard DeGroat

* Titles: CEO/co-founder/majority owner, CareVest Capital Inc.; managing partner, Tom Capital Associates.

* Born/Raised/Age: Lindsay, Ont./49.

* Family: Wife Meredith, three children.

* Education: University of Waterloo, bachelor of arts in history, political science; University of Windsor, law degree.

* Career: DeGroat articled with the Calgary firm of Fenerty, Robertson, Fraser & Hatch (now known as Fraser Milner Casgrain) and spent 15 years with the firm, specializing in corporate finance, mergers and acquisitions, and reorganization or disposition of distressed corporations. In 1995, he joined Tom Capital Associates, a Calgary private equity firm, as a managing director and has been CEO of CareVest Capital since 1998.

* Pastime: Woodworking.

THE COMPANY: CareVest Capital Inc.

* Brass: Richard DeGroat, CEO; Alan Baumann, president/chief operating officer; Roy Goddard, chief financial officer.

* Profile: CareVest is a real estate lender and investment management company. Established in 1994, the company serves real estate investors and property owners from offices in Vancouver, Victoria, Calgary, Edmonton, Lethbridge, Kitchener and Mississauga. CareVest specializes in placement and management of investment funds into Western Canada and Ontario commercial real estate mortgages.

* Stats: CareVest has more than $130 million in assets under administration and represents more than 2,100 investors.

* Head Office: #600, 645 7 Ave. S.W., Calgary, T2P 4G8.

* Phone/Fax: 403-509-0115, 877-509-0115 toll free/ 403-262-9520.

* Edmonton Office: 780-428-7507.

* Vancouver Office: 604-632-9919.

* Victoria Office: 250-383-6761.

(Gyle Konotopetz can be reached at gyle@businessedge.ca)