Sunday Sitdown: Looking at Chicago's housing market with Seneca Real Estate's Thomas Morabito

Seneca Real Estate Group, headquartered at 600 W. Jackson Blvd. in the West Loop, transformed itself after 2010’s economic downturn. Now a full-service real estate company specializing in leasing, property management, investment sales and advising clients, it saw revenue grow last year by 25 percent. Thomas Morabito, Seneca’s president, spoke with reporter Sandra Guy about Chicago’s housing market — and why he thinks people are paying too much for properties these days. A condensed transcript follows.

Question: You emerged from the housing crisis as head of a company that employs 17 and continues to expand as you leverage Chicago’s healthy real-estate market. Your company acquired strategic property-management businesses like Zifkin Realty in 2012 and RN Realty Management in 2015 and set up a partnership for property-management services in 2013 with @Properties.

Answer: None of it would have been possible if the real-estate market hadn’t turned around and created demand. There is a demand for condos in Chicago unlike any other major metro market. The last three to four years, you saw a conversion trend from condos to a rental market. Rental rates for condo-quality residential units have gone up 75 percent to 100 percent over the last 24 to 36 months. As for the for-sale condo market, we’re seeing more four- to five-story condo buildings. We’re seeing these types of projects popping up in Wicker Park, Bucktown, Lake View and Lincoln Park.

Q: What’s the downside?

A: People today are overpaying for properties. If they bought in 2009, 2010 or 2011, they got an unbelievable opportunity to buy something at 60 to 70 cents on the dollar. Today, owners and lenders are less likely to write down their assets. We’re getting to a tipping point where people are paying, say, $3,000 a month in rent — that’s akin to what you’d pay with a $450,000 mortgage — and thinking, “Maybe I should go buy.” So I think, in the next 24 months, you’ll see a lot more condo projects. Also, interest rates for residential apartment buildings have been fueling demand for those investments. When interest rates go down, prices go up. I believe we’re in a mild bubble in terms of apartment buildings being acquired as an investment. I don’t think this bubble will be as severe as in 2008-2009.

Q: You require your property managers to take a “Jerry McGuire” approach — that you can’t get through tough times if someone doesn’t like you or know who you are. What does that look like?

A: Texting and emails are an impediment to developing personal relationships. If that means getting on the phone, meeting face to face, then that’s what it takes. No one is calling us up because the property looks nice today. It’s because there is a backed-up toilet or a pothole in the parking lot. We’re going to make mistakes every day. You admit it, apologize and learn from it. Our clients have hundreds of thousands of dollars at stake in their investments. I had three calls on Christmas Day about issues involving a building. When I interview prospective employees, I always ask if they were Cub Scouts or Girl Scouts, whether they went door-to-door selling products and whether they put themselves in uncomfortable situations like looking someone in the eye and trying to sell them something.

Tom Morabito, Seneca Real Estate Group’s president, left, with the West Loop company’s chief financial officer, Stephanie Hedrick. | James Foster / Sun-Times

Q: You’ve hired one of the few women in Chicago who help run a real estate-related business — Stephanie Hedrick, your chief financial officer.

A: She runs the company. She does everything. She’s a CPA. This business would not be able to run without her at the helm. She ensures our institutional quality accounting and reporting. Last year, we grew 25 percent in gross revenues. This year, we will grow 30 to 45 percent in gross revenues. That’s a testament to the human capital we have.

Q: You have 14-year-old twin boys who are autistic. You’ve said that has helped you in the business world. How?

A: You get thrown a curve ball. Your back is against the wall. You rise to the occasion in tough times, or you fail.

When you have special-needs kids, you try everything — therapists all day long, different vitamins, medications. I bought an oxygen tank, an infrared sauna. No one can understand unless you’re living that life. But they’re going to New Trier High School next year, and we’ll see them off to college.