Perspective on Real Estate

May 16, 2002

May 22, 2002

May 23, 2002


Real estate, fear and the echo chamber

The news about terror and our war against it intersect in high-rise buildings and the increasing budget displacement it has created. This week's news has added the fear of possible attacks into the very popular apartment sector.

Recognize that there is an echo effect in the media's response to any rumor, announcement or pronouncement on this subject. You know, when you shout a word and it echoes back several times -- more vibrant than the original word. That's how it is with this terror thing. Its form is terrifying, once you've been through it -- or witnessed it -- in person or on TV.

Presently, the echo chamber is hard at work as the word circulates that "apartments may be the next targets." Does that mean high-rise? Does it mean San Diego? What does it mean? The problem is that this echo chamber is held captive by the terrorists who lick their chops as they witness the hysteria the current rumor has become. Freedom of the press becomes freedom to depress.

Now, additional criteria have entered the vernacular of San Diego real estate investment, "bio-terrorism," our very "open" border and the access to a worrisome kind of atrocity. This is far more important than interest rates; one incident (God forbid) will reign havoc on the marketplace, not just on a structure.

Apartment owners (and others) will now have to worry about what this all may mean. There is a great difference between "mean" and "may mean." One is a well-reasoned, direct conclusion caused by weighing the facts. The other is irrational fear caused by echoed hysteria. Since I write the highest circulated newsletter in the apartment industry, I have warned my readers about this new challenge of liability and cost. Now I am concerned about the psyche of the residents.

For years the voter has been told that the government is the enemy -- big or small. "Of, for and by the people" was no longer your government. Now it was to be distrusted. That has come home to roost during this unique war -- the battle against terror. The problem illuminated in the Enron fiasco is whom can we trust, as once-sacred professionals and trusted analysts proved the distortion between making a fast buck and telling the truth.

As I work with the deprived-but-proud inhabitants of the magnificent "Bronze Triangle" communities -- just east of downtown -- we try to get affordable apartment rentals built. (I don't see them as victims of potential terrorism, except their valid fear that their kids may never be able to afford decent housing of any kind.) However this latest rumor has to do with someone "moving" into a rental just to leave a bomb to create sudden "vacancies" in the neighborhood. Fear is tough to overcome when it enters an echo chamber. This one has to be nipped in the bud, as the terrorists usually select some high visibility place with which to destroy people's trust in their neighbors. However, the echo chamber will have a wider prism through which to deploy its fear. The press will make any event of terror much larger than its explosion.

What to do? Please understand the criteria for choosing a building in which to invest: Timing, cost per unit, location, deferred maintenance, positive cash flow, mortgage servicing, mortgage availability, condition of neighborhood, crime, public transportation and other conveniences. Also understand that owning or managing an apartment is a little like parenting children -- not that renters are children. But it takes intense sensitivity to their expectations as well as your promises. Management of people is a social and an economic responsibility. It is also ethical practice that is real rather than "mutters" at religious services. After all, God doesn't sue, though He may punish.

Goodkin has been a business ethicist and housing analyst since 1956. He may be reached at sandy.goodkin@sddt.com.


May 16, 2002

May 22, 2002

May 23, 2002