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By JILL ESTERBROOKS, Special to the Daily Transcript
Tuesday, September 10, 2002
"Our income property brokerage business is up about 50 percent this year and Sept. 11 is a contributing factor," said Terry Moore of ACI Commercial. "People buy income property for income purposes. Our clients buy property with 50 to 70 percent borrowed money. Interest rates are at the lowest level in two generations, making many more transactions feasible."
Moore said, "San Diego is so well-diversified that we have more jobs today than we did a year ago. This is not true for the state or the nation. This diversification highlights why San Diego has lower risk than most other markets."
According to Moore, "Sept. 11 affected our industry in four ways: insurance, recession, revised perception of stock market and interest rates. Overall, investors have moved to the safety and stability of income property."
After 9/11, Moore said insurance costs climbed 20 percent to 50 percent.
Second, he said the national recession means job losses, lower occupancy and thus lower income for the landlord. "Ordinarily that hurts income property and its brokerage. This cycle is different because of the last two factors."
"Now income property looks far better than other investments," Moore said. "Standard and Poor 500 is selling for 20 to 25 times earnings. Income property sells for 12 to 15 times earnings. Income property offers tax shelter and leverage that is not available to financial investments."
Finally, interest rates dropped from 8 percent to 6 percent.
"The lower interest rate magnified the power of the borrowed money," Moore said. "This is massively important."
Overall, Moore said 9/11 has had little impact on the nation. "America is still free, vigorous and the world's economic and military leader.
"Perhaps we have remembered what made the nation great. Perhaps we are humbler. Perhaps we understand that there is no guarantee of mortal life tomorrow. Perhaps we have reflected on what will matter after we are buried. If so, that is good."
Esterbrooks is a free-lance writer based in San Diego.
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