Mark Segal on The Habitat Company’s History, Philosophy and Why it’s Not Afraid of the Poor

Recently we went behind-the-scenes, up-the-construction-hoist, and through-the-dust to bring you an early preview of Hubbard Place (360 West Hubbard Street), The Habitat Company’s new residential skyscraper under construction in River North.

I also sat down with Mark Segal, the president and C.E.O. of Habitat and talked to him about his company, and its work in Chicago.

Mark Segal

Mark Segal, President and C.E.O. of The Habitat Company

Editor: For those who aren’t familiar with The Habitat Company, how about a little history lesson?

Segal: Sure. The Habitat Company was founded in 1971. We are a multi-family development and management company. We’ve been doing that from our founding. We’ve developed a little bit more than 17,000 residential units during that period of time. The bulk of our development has been in the city of Chicago.

habitat_logoI think one of the unique features of when we do development is what you see at Hubbard Place – The way we try to make sure the development we do fits so well in the community and contributes to the broader community when we do those developments. So, the park-like setting at Hubbard Place is really an extraordinary welcome home for our residents.

We do the full spectrum of multi-family work, so we develop and manage luxury residential residences like Hubbard Place. We also manage condominiums and manage condominiums. And we do a variety of affordable and public housing management in the company.

So the diversity of what we do from a multi-family housing perspective is as broad as it can get.

We have a footprint right now in five states. We manage 20,000 residential units across those five states, with Chicago being our largest presence.

Aside from our development work we have a project management team. We do approximately $20 million worth of capital improvement work that we oversee on an annual basis, separate and apart from the high rise development that we do.

Editor: In addition to building, you’re also a buyer.

Drawing of Hubbard Place, courtesy of The Habitat Company.

Drawing of Hubbard Place, courtesy of The Habitat Company.

Segal: We have moved into acquiring residential communities in the past few years. We acquired two assets in the Ann Arbor market of Michigan, and we have acquired two assets in the Creve Coeur submarket of Saint Louis. And we’re continuously looking for the right acquisition opportunities, where we think that what we do as a company – the operating platform and the way we look at assets and can renovate them – really adds value to the existing asset that we acquire.

So for us, what we’re able to deliver as an operating company really enhances the acquisition opportunities that we pursue.

Editor: What made Habitat branch out? Was it the economy, or opportunity?

Segal: I think it was opportunity. It was also to diversify what we do as an organization, in terms of diversifying where we are on the risk-reward spectrum. So we do development work, and that’s high-risk, high-reward. And we do fee management risk, which is lower risk and lower reward. And there’s a piece in the middle, particularly with acquisitions where value-add opportunities exist, which plays to the strength of who we are as a company, both as a developer, as well as having extensive management operations.

You’ve seen how we do with development, trying to create wonderful homes for our residents and offer them a great deal of convenience in how we build the homes. What we also do is try to generate a lot of service opportunities for our residents, where our team is focused on customer service.

We spent a lot of time investing in our operating platform as a company, trying to make sure that the folks who are working on-site as Habitat team members are focused uniquely on the needs of the residents. Because no one else at the company has an opportunity to have an impact on our residents lives other than the people who are on-site.

So what we’ve done is focus on taking away as much administrative burden as we can from our on-site team, so that the interactions our on-site team have with our residents and our prospects is completely focused on customer satisfaction.

People want to do things when they want to do them. They don’t want to be subject to what our particular hours may be, and so we work on creating tools to allow convenience for our residents. So we have a service called “Habitat at Home” that allows people to apply to see a community; apply online to become residents in our communities; and once they become residents, they’re able to pay their rent, review their account, place a service request for our maintenance team to respond to, and communicate with out on-site team. We also use it as a notification service for our residents, so if anything comes up, that’s a great communication tool for us as well.

Editor: Habitat seems to be unusual among the large players in this marketplace in that you don’t shy away from Section Eight and affordable housing. Why is that?

The Buckingham (360 East Randolph Street), another Habitat project

Segal: Our founder and chairman, Daniel Levin, said as kind of a founding principle for us, “No real estate development is only an investment in real estate. It’s an investment in the lives of the people who live and work in that community.” Chicago is a wonderful vibrant and diverse city. And what we pride ourselves on is creating a home that is great for everyone.

The only constraints we have are the resources that are made available to us by our clients. And so we have a history of providing quality affordable housing, ourselves. We have a history of helping other people we work with provide quality affordable housing. And we also have a significant commitment to public housing.

In my mind public housing is an aspect of affordable housing. Many people distinguish those two, but they are becoming more and more one. We’ve been committed to that since our founding.

Now, Hubbard Place is a market rate community, and appeals to a certain segment of the market, but we continue to look at affordable development opportunities.

And of course, we have our history with the Chicago Housing Authority and the work we did under the Gautreaux Consent Decree, initially as receiver and then as Gautreaux development manager. That work has ended, but we’re very proud of the contribution we were able to make to the city of Chicago to eliminate the legacy high rises that really created areas of disinvestment and had an adverse effect on people’s quality of life. To create opportunities for reintegration of not only the physical space and new homes and mixed-income communities, but also to create areas of investment where you see commercial and retail coming into areas. You’re seeing a commitment by the city and other stakeholders to building schools, fire stations, police stations, and really enhancing the overall community in areas that were just holes in the middle of the city where things were not happening.

So that’s a physical aspect, but the greatest achievement was the impact it’s had on the quality of people’s lives. And that’s the real measure, is to end the cycle of poverty; to allow people the opportunity to engage in the broader community. And you get to a certain critical mass, where I think we are, where it becomes an engine that keeps perpetuating itself.

Editor: The part of Chicago’s housing market that seems to have taken the biggest hit in recent years is the S.R.O. I noticed that you have an S.R.O. featured very prominently on your web site. Is there still a future for S.R.O.’s in Chicago?

Newberry Plaza (1050 North State Street), another Habitat project

Segal: S.R.O.’s are a challenging market to be in right now. I think affordable housing in many respects is challenging, given the many constraints on resources that are available right now.

When people talk about tax reform, one of the things people are saying is that we’re going to start at square one and revisit what tax incentives we’re going to create. The low-income housing tax credit is something that is critical to preserving and creating affordable housing.

So while we have a lot of luxury developments that are being built in the city of Chicago today, there is an even greater need for quality affordable housing, and making sure we have those types of resources available is key.

We are in the process of reinvesting in our existing S.R.O. to extend its life to continue to serve that community, and we continue to look for opportunities to create quality affordable housing for a range of folks.

Editor: What incentives are needed to bring other developers into that market?

Segal: I think making sure the financing is there to make it possible to create these communities is important. But I think it remains a challenge for engage people generally. Like you said, we’re kind of the exception among developers. I don’t mean to be dismissive of others in the market. There’s an incredible wealth of developers in the Chicago area, and national companies that are very committed to creating quality affordable housing, and we have a great core here in Chicago.

But I think you’re either interested, or you’re not. I don’t think it’s something that a financial incentive is going to get people involved. I think the challenge is to make sure that there are the resourced there to actually do the developments.

If you look at land values in the city core, how do you create affordable housing when you have an [huge] initial expense to acquire land in close proximity to jobs. Those are some of the challenges that we have to deal with.

The city has the ability to leverage some of the resources it has in terms of land to create those opportunities.

You’re generally looking at a development fee as an incentive for the developer, because these are not appreciating assets. The return in many cases is through the return on the tax credit.

Editor: Another developer putting up an apartment building near your Hubbard Place tower estimates that in order for someone to afford a one-bedroom apartment in downtown Chicago, a person has to have an income of $95,000 a year, which is roughly triple the current definition of “middle class.” So to make his apartments more affordable, he’s reducing their size. Are you employing a similar strategy?

Segal: Balancing the building specifications and the quality of the project, there are different grades of quality. How you spend your dollars to build that housing is an important thing. Also, the value of the land, and how you manage your operating costs are each components you need to look at to create affordable housing.

I think you can create affordable housing without necessarily having that type of income level.

Three of the four Presidential Towers

Editor: One of your big projects that included affordable housing is Presidential Towers (555 West Madison Street) in the West Loop. Tell me about that.

Segal: When we first built Presidential Towers there really wasn’t much in that area, and so Presidential Towers was built as an island with an inward-looking perspective. We created in the commercial space there services and amenities for the people who lived in Presidential Towers.

Since Presidential Towers was built, the neighborhood developed around it, and so it created an opportunity for Waterton [the current owner] to reposition and open up the ground level of that property and create amenities and retail that serve the broader community.

I think those kinds of opportunities as neighborhoods change are wonderful and I think that sort of thing will continue to happen in areas around the city of Chicago.

If you stop and think about what River North used to be like, and you look at the transformation River North has had, and now it’s an incredible thriving community. It has a very residential feel to it. It has all of the retail and amenities that anyone looking to live in the area could want.

Right across from Hubbard Place we have the iconic East Bank Club. We’ve got grocery a couple of blocks away. We’ve got a pet store right around the corner. You’ve got restaurants, art galleries, the clubs, everything right here.

Editor: You’re most active in River North, is that because you have a land bank, or just opportunity?

Segal: Our development has been principally in River North in terms of our last developments, but really it all ties back to the vision of our founder, Daniel Levin, when he created the East Bank Club in the 1970’s.

Kingsbury Plaza

There was an original view to building a high rise tower exactly where we’re building Hubbard Place, as well as one where we’ve built Kingsbury Plaza (520 North Kingsbury Street). So I guess you could say this is the fulfillment of the vision created in the 1970’s.

Editor: Where do you see River North and Near North going from here?

Segal: I think they’re going to continue to be growing communities. I think people are going to continue to want to live here. I think it offers people the ultimate in terms of live-work-play environments. People seem to be very focused on convenience. Hubbard Place has everything that River North has to offer. It also has access to transportation, so people can walk to their work in The Loop, they can access the L, and we’re on bus lines. I think it’s a great area for folks to be.

Editor: So, where are you looking for your next big thing?

Segal: We’re looking in a number of neighborhoods in Chicago for the right development opportunity. We’re currently pursuing a few different development opportunities. We’re very bullish on the city of Chicago. We think it’s a wonderful city with even better times ahead of it.

You’re seeing a great inflow of employers into the city. We think what’s happening in Chicago is part of the re-urbanization that people are seeing across the country right now.

When asked which Chicago neighborhood Mr. Segal sees becoming the next River North or South Loop, he half-jokingly chose not to answer.  Some secrets he has to keep.

Editor

Author: Editor

Editor founded the Chicago Architecture Blog in 2003, after a long career in journalism. He can be reached at chicagoarchitectureinfo@gmail.com.

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1 Comment

  1. Very nice piece on an impressive person leading an impressive company.

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