Michael Pasquinelli, CEO of Pasquinelli Construction in Chicago, has been in the home building business most of his life. Pasquinelli grew up working in the company that his two brothers, Bruno and Tony, started in 1965. Last year, the company (which builds under the names Pasquinelli Homes and Portrait Homes) closed on nearly 3,800 units, 93 percent of which were attached product. Though he started in construction as a carpenter's helper and laborer while in high school, the family business has become more than a job, it's also become his hobby.
MP: About 50 years ago by my brother Tony and my brother Bruno.
BB: When did you become involved it?
MP: I became involved with it right after the army in 1972 or 73.
BB: Did you work over summers or anything before that?
MP: I was a carpenter's helper and laborer. I've been working there since high school in the 60's. I've been in the company for a long time.
BB: When you went into the Army did you know homebuilding was something you wanted to do?
MP: I explored other things, but I thought that there were opportunities there for me. I had gotten married in the Army and I came back to Chicago. I thought it was a natural thing to come back and do those things that I was doing before. I kind of fell into it naturally.
BB: How have you progressed through the company since you came back?
MP: I've gone as a project superintendent to a project manager to division manager to chief operating officer for a region to a chief executive officer. It's been a varied career for me.
BB: What are the biggest things you learned from your family as you progressed through the business?
MP: Just the work ethic. We're very work oriented and disciplined. I would say we're somewhat conservative in our approach. It's suited us well in the 30-plus years I've been in a management position with the company.
BB: How has Pasquinelli been conservative?
MP: We've been conservative in expansion and conservative in how we view the homebuilding business. We've controlled expansion and stayed within our means. And we've done very well.
BB: Does that approach help you in times like these--where we see companies who may have expanded too quickly during the height of the boom now paying for it?
MP: We try to look at both sides of the equation before we're doing anything. I think we're in a better position today by looking at it the way we have rather than taking a liberal approach to the business.
BB: I know you mainly do attached product. When did that become a focus for your company?
MP: It wasn't at the beginning. It has been in the last 20 or 25 years ago, since we've been reaching out of the Chicagoland area in our expansions.
BB: How did you decide to get into this niche?
MP: When we started to expand to other parts of the country, there was a need for attached product that wasn't being served. We, fortunately, had the foresight to say, 'Well, let's try this. It's something that's being underserved.' We did and it proved correct. We've been successful doing that.
BB: Is it easier or harder to find profitability in that sector?
MP: Homebuilding is hard whether you build single family or multifamily. It's about the same. It's a little different than single family side, but profitability is about the same.
BB: How do you choose a market you're going into?
MP: We have a series of consultants that we use. We use John Burns to give us a cross section of the demographics. We use Tracey Cross to give us their market overview. Certainly we look at the economy of the area that we want to expand into. We look for job growth. We look for positive demographics for our type of product.
BB: Is that more entry level buyers?
MP: It's entry level buyers. We go down there and we take a look. We kind of search it out based on the information we received from our consultants. We nose around ourselves. If we find that's it good, we expand into the area.
BB: Once you expand, how do you gear up as far as personnel and land acquisition?
MP: We use people that are on our organization. I will hire manager that we will train prior to putting them in a new area. We like them to get familiar with the way we do business. Once that manager gets into that position, will hire local people and staff those areas in land development and production and sales. That manager will go out and look and identify and purchase properties for us.
BB: What's more important--someone who is familiar with the market or someone who is groomed in your organization?
MP: It would be beneficial if we could find someone from the local area that we could hire and train. Then we could put someone back into that marketplace that has some general knowledge of the area.
BB: How are you dealing with the downturn in the market? How has that affected your business strategy?
MP: One of the strategies my brothers impressed on me was geographic diversification. We have diversified out of the city of Chicago. We have some good divisions and have some marginal divisions. Our strategies are different depending on what division we're talking about. Certainly, we look at the downturn in a conservative light. When necessary, we cut down our staff and overhead.
BB: You went to the Texas markets fairly recently. What took you to Texas?
MP: One of my brothers had gone to Texas eight or nine years ago for the homebuilders' convention. After we looked at job growth, how the economy was doing, and the niche that was available, my brother felt like it would be a good market for us to enter. Dallas didn't have a lot of multifamily attached eight or nine years ago. They had a big crash in the 80's and it was a strong single family marketplace. So we went down there, using the process that I described and bought two or three pieces of property and we entered the market an entry level attached and it's been very good for us. Certainly, we're not the only attached developer any longer. There have been quite a few competitors.
BB: What is the impact of the subprime crisis? Is it something you've seen coming in for awhile?
MP: Not really. It's like everything else. There were a lot of excesses in the market. The ultimate influence of the subprime collapse is that all other types of financing requirements have tightened up. Not only are you losing a finance vehicle to get first time homebuyers to purchase. Even the other vehicles have tightened up their credit. You're getting a double bubble. It's the overhang of inventory. It's the investors. These are excesses. Certainly when it's going well everybody enjoyed. Now it seems like the industry is paying the price.
BB: In your spare time, what do you like to do? How do you spend your time away from work?
MP: This [working] is it. My family has grown. I spend sometime with the grandchildren. I play golf occasionally. When I say occasionally, I mean occasionally. As is the case with my brothers, my life is wrapped up in what I do. I find a lot of enjoyment in it, as they have. They've been very, very good mentors and fine examples for me to follow.