What Pacific Shores Isn Telling You

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					What Pacific Shores Isn't Telling You
For the web version of this alert, go to http://www.jerrymarlow.com/ps
As you look around Pacific Shores, you probably get excited
about the prospect of living here. I know I did. The
swimming pools, the barbecue grills, the Jacuzzi, the
poolside exercise room and the wireless internet connection
in the courtyard all create an aura of a fun and exciting
lifestyle. Then too, the way San Diego real estate prices
have been going up and up and up, surely a condo at Pacific
Shores will make a great investment. What's more,
mortgages are easy to get and, most likely, mortgage rates
are the lowest they're going to be for a long time to come.
What could possibly go wrong?
Funny you should ask.
Pacific Shores is selling the condos for 53% more than
they paid for them in May 2004. Before the condos can
become worth what you're paying for them, they have to
appreciate by 53%.
Pacific Shores Condominiums are noisy like you wouldn't
The people behind Pacific Shores Condominiums have a
history of engaging in less than honorable business
You may be buying into a real-estate bubble.
The people who know Pacific Shores Condominiums best—
the tenants— aren't buying.
Pacific Shores is selling the condos for 53% more
than they paid for them in May 2004. Before the
condos can become worth what you're paying for
them, they have to appreciate by 53%.
According to The San Diego Daily Transcript, Pacifica
Oceanview bought the 108-unit Pacific Shores apartment
complex for $25,056,000. If we generously estimate that
Pacific Shores/Pacifica Oceanview is spending $2 million on
renovations, then their total cost for acquiring the complex
is $27,056,000.

Purchase complex for                           $25,056,000

Make renovations of                            $2,000,000

Total cost to Pacific Shores/ Pacifica         $27,056,000

To see how much profit Pacific Shores intends to make on
the condo conversion, we can estimate how much they're
selling the complex for. We can also back out how much
they paid for each condo and how much profit they intend
to make on each one.

                        2004                     Total      Selling                     Profit
Condo        Number     Cost of                  Cost of    Price of       Profit per   as
Type         of Units   unit       Renovations   Unit       Unit           Unit         percent      Proceeds

Studios      37         $182,005   $14,528       $196,533   $300,000       $103,467     53%       $11,100,000

bedroom      53         $242,673   $19,370       $262,044   $400,000       $137,956     53%       $21,200,000

bedroom      18         $303,341   $24,213       $327,554   $500,000       $172,446     53%        $9,000,000

complex                                                                                           $41,300,000

complex                                                                                           $41,300,000

Total Cost
of                                                                                                $27,056,000

Profit                                                                                            $14,244,000

Profit as

When we make these calculations, we see that Pacific
Shores is planning on making a 53% profit from you.

To get a sense of reasonable prices for the condos, we can
take the price that Pacific Shores paid for the building and
look at the rental prices that would result from raising the
2004 rents on the apartments by an amount justified by
the renovations and then by jacking them up by the 53%
profit margin Pacific Shores's intends to get from you.

                          2004       Renovation    Rental         53% Hike Over
Condo Type                Rent       Bump          Value          Rental Value

Studios                       $900           $72           $972          $1,483

One-bedroom condos          $1,200           $96      $1,296             $1,978

Two-bedroom condos          $1,500          $120      $1,620             $2,472

To see how absurd a 53% hike in rental prices would be,
we can compare the hiked prices to market rental prices. A
quick look in the San Diego Reader in early September
shows roughly the following market prices for rentals in
Pacific Beach.

                                                                  Percent by
                                     53% Bump                     which Hiked
                                     Over          Market         Rates would
                          Rental     Rental        Rental         Exceed Market
Condo Type                Value      Value         Rates          Rates

Studios                       $972        $1,483           $900       65%

One-bedroom condos          $1,296        $1,978      $1,100          80%

Two-bedroom condos          $1,620        $2,472      $1,600          55%

Depending on which type of condo you're buying, this
conservative analysis suggests that the condos at Pacific
Shores are overpriced by anywhere from 53% to 80%. The
analysis is conservative because it assumes that the price
Pacific Shores paid for the complex was not a bubble price
and that the price Pacific Shores paid for the building was
in line with 2004 fair market rental prices.
If you find this information useful, please let me know.

Pacific Shores Condominiums are noisy like you
wouldn't believe!
When you look at the condos and amenities at Pacific
Shores, your eyes feed your fantasies. You see the empty
pools, barbecue grills and Jacuzzi; you imagine fun times.
Unfortunately, once you move in, your ears channel reality
to your brain.
Acoustics in the courtyard are horrendous. A resident of a
courtyard-side home can hear and be awakened by every
conversation in the courtyard, by every cell-phone
conversation in the courtyard, on a balcony or from an
open-air hallway, by every TV where there's an open
window, by every ringing phone, by early morning and
late-night exercisers in the fitness room, by dryers that
pump hot air and noise into the courtyard, by the whirr of
the electric motors and mechanical pumps that drive the
Jacuzzi filters and even by instances in courtyard-side
homes of what religious fundamentalists call procreative
When tenants of many apartments come home at 2:30
AM, they walk through the courtyard to get to their homes.
Even their sober conversations wake up just about
everyone in courtyard-side apartments.
On the Turquoise Street side of the building, we have the
usual traffic noise plus Wind 'N Sea Towing. Their tow
trucks all have diesel engines. They park a bunch of them
in their parking lot overnight. They haul in wrecks and
jockey them into the parking lot. In short, when Wind 'N
Sea Towing gets a call in the middle of the night, you get
woke up. And this is just the noise in the middle of the
When the alarms and TVs of early-risers come on at 5:30
AM, you might as well become an early riser too.
Are kids and grandkids going to be allowed to use your
swimming pools? If yes, then I have two words for you:
"Marco!" "Polo!"
In the hot tub, many nights you're likely to have some ex-
frat boys trying to recapture their fraternity days. The
more they drink, the louder they'll get. If you happen to be
an ex-frat boy, great! You can have a wonderful time at
everyone else's expense.
The only way to alleviate partially the problem of noise
emanating from the courtyard and from the street is to
keep one's windows sealed shut.

But keeping windows sealed shut only attenuates some of
the noise emanating from outside. Walls and floors are
thin. Windows are single-pane. The forced-air ventilation
systems in the bathrooms are loud. The non-hearing
impaired are even awakened when their neighbors turn on
their bathroom lights in the middle of the night.
Noisy? No need to take my word for it. Next time you're in
the complex, give the acoustics a try. Stand near one
swimming pool and say, "Marco!" Have a friend stand near
the other pool and say, "Polo!" Notice how it sounds like
your friend is standing right next to you.
When you're in a model home, open a courtyard door or
window. Have your friend go to the far end of the
courtyard and either make a cell-phone call or say "Marco!
Polo!". Close your eyes and listen. Though the complex is
90% vacant, even in your reality-resistant frame of mind,
you'll probably hear more noise than you would like.
If you're deaf, if you like to listen to neighbors' arguments,
cell phones, TVs, tirades, and trysts, if your noise drowns
out everybody else's, or if you're forever trying to
remember the name of the most famous Westerner to
travel the Silk Road during the 13th century, then you may
enjoy living in a courtyard-side condo.
Pacific Shores is being very shrewd in keeping the complex
as empty of tenants as they can while they're selling
condos. The complex is reasonably quiet- so long as it's
empty. Once the complex fills up, you won't believe the
amount of noise bouncing around the courtyard and into
courtyard-side homes.
If you're buying your condo as an investment, when it
comes time to sell and recoup your investment, is Pacific
Shores going to empty the complex of people for you? Or
are your prospective buyers going to be unable to ignore
the noisy reality of an occupied 840/860 Turquoise Street?
Light pollution galore
The security lights in the courtyard are so bright that the
only way to get to sleep is to close the blinds. Between
keeping one's home sealed against noise and against light
pollution, there's goes the "Southern California lifestyle!"
Bathrooms are prone to mildew
Given the poor ventilation in the bathrooms, they are
highly prone to large growths of black mildew.

The people behind Pacific Shores Condominiums
have a history of engaging in less than honorable
business practices.
At sophisticated financial institutions, the first rule of doing
business is "Know your counterparty." A counterparty is
the person or entity on the other side of the transaction
into which you are entering.
If you are considering purchasing a condo at Pacific
Shores, you might do well to learn more not only about the
pricing of the condos and about the property you're
considering buying but also about the business practices
and standards of the people with whom you're dealing.
Your counterparty
The parent company of Pacific Shores Condominiums is
Pacifica Companies, a group of diversified real estate
companies. According to their web site at
http://pacificacompanies.com/index.shtml, Pacifica
Companies was founded in 1978 by Mr. Ashok Israni.
A Google search on "Ashok Israni" turns up things like his
suit to reap a "windfall" of "$635,000 for the value of
tenant improvements" that the Vietnam Veterans of San
Diego made to property that they leased from Mr. Israni
and at which they provided services to the homeless. Ash's
windfall would've been at the expense of the Viet Nam
Vets. The full story is at
According to Clergy and Laity United for Economic Justice,
Pacifica Host (president Ashok Israni) bought out the
Wyndham Hotel and changed its name to Radisson. "As a
result, 240 workers lost their jobs. And some of them have
been working [t]here for over 30 years." For more info, go
to http://www.cluela.org/ClueNews/020510Tidings.html .
Employees of the Isranis illegally scattered
asbestos-laden debris around the Pacific Shores
When I moved into Pacific Shores (then called La Jolla
Pacifica), the rental agent, Matthew Klewkamp, told me, as
he told other tenants, words to the effect of, "There's
asbestos in the ceilings. Don't drill into the ceiling. Don't
disturb the asbestos." Along with signing our leases, we
tenants signed acknowledgments that we understood there
to be asbestos in the building. Signs in the entrance foyers
of the buildings next to the elevators warned tenants of
the presence of materials hazardous to one's health.
(Pacific Shores recently covered up these signs. Rip off the
sign next to the elevator that directs you to the sales office
and you'll find a sign warning of hazardous materials in the
After Pacific Shores Condominiums acquired the property
in May 2004, without permits, without proper precautions,
and without telling the tenants, Pacific Shores began
ripping out apartment ceilings and scattering asbestos
hither and thither.
In its article Condo conversion raises concerns over
asbestos, the San Diego Union Tribune says, "Deepak
Israni, Pacifica's senior vice president, said the presence of
asbestos was not revealed to the Department of Real
Estate because Pacifica, which at the time had not closed
escrow on the complex, probably was unaware of it." Well,
maybe if they had read the signs in the lobbies or looked
at any tenant leases they would have been aware.
The Tribune article goes on to state, "initial inspections
have concluded that no violations have occurred." Really?
Inspector William Jacques of the County of San Diego Air
Pollution Control District tested for the presence of
excessive amounts of asbestos at Pacific Shores. According
to his 180+ page report, an analysis of a sample of
construction debris in the patio common area, outside unit
#103, for instance, found 4% asbestos in it. Jacques told
one tenant that asbestos is not a concern only when its
concentration is under 1%.
After tenants blew the whistle on them, Pacific Shores took
steps to conform at least with the laws on asbestos. Still,
the asbestos has yet to be removed from my apartment.
Yours? What's the plan for the hallway ceilings?
To obtain a copy of the Pacific Shores Condominiums
asbestos report, go to the web site of the County of San
Diego Air Pollution Control District at
http://www.sdapcd.org .
Mouse over Permits and Forms.
Mouse over Related Forms.
Click on Request for Public Records Form.
Request the Pacific Shores Condominiums, 840 Turquoise
Street asbestos report compiled in June and July 2004 by
Inspector William Jacques.
To learn about the effect asbestos can have on your and
your kids' lungs, go to the American Lung Association's
web site at
c=dvLUK9O0E&b=34706&ct=67105 .
Other less-than-honorable business practices of
Pacific Shores Condominiums
The Union Tribune article also points out that Pacific
Shores began demolition and construction on the building
without first getting the permits required by law. Which
law designed to guard your health and safety will they
break next?
One person who put down a $2,000 deposit to buy a
Pacific Shores condo told me that Pacific Shores came back
to her and demanded she increase the deposit to $5,000.
The photos Pacific Shores shows on their web site to entice
you into buying a condo represent Pacific Shores business
practices far better than they do what you'll be getting for
your money. That crystal-clear water on a nice, clean
beaches isn't four blocks away, but 3,000 miles away in
the Caribbean.
Are you savvy about lowest common denominator,
multicultural business practices?
Let's face it: many of us Americans are still provincial
about business practices. We grew up in what until
recently was a landscape of business practices dominated
by Judeo-Christian values. We presume that most people
most of the time are honest in their business dealings and
follow the law in their commercial practices. People from
other cultures, however, may have different standards and
follow different practices.
Asia Travel Information offers this advice on doing
business with Indians: "Verbal agreements are not
considered binding, unless supported by a written
agreement. Most Indians view legal contracts as a
beginning of a business relationship. Lawyers are generally
mistrusted and are not always used. In your negotiations
try to receive payment up front or at the closing of the
transaction whenever possible; otherwise, beware."
The experience of tenants at Pacific Shores Condos has
been that the Ashok Israni, Deepak Israni and Pacifica
Companies have a "Tenants be damned!" attitude toward
us. Apparently they also have a "Viet Nam Veterans be
damned" attitude, and a "Hotel employees be damned!"
attitude. Who will be next? You?
To repeat the advice of Asia Travel Information: Beware!
A purely hypothetical scenario completely unrelated
to the foregoing discussion
Going into financial transactions, most of us assume that
our counterparties are acting in good faith. As a purely
hypothetical conjecture, imagine that you entered into a
sales agreement at a stated price for a large-ticket item—
a yacht say— and paid a deposit. Then, when it came time
to close the deal, a representative of the selling
organization informed you that the person with whom you
were dealing previously was not legally authorized to set
selling prices. Hence, to close the deal you have to pony
up an additional $25,000 or so. Or you could risk losing
your deposit. What would you do? How would you feel?
Bummer, huh? Well, no worries. Nothing like that could
ever happen among people who act in good faith.
If you buy a Pacific Shores condo, will you be buying
an over-priced condo at the peak of the bubble?
As everybody knows, real-estate prices in San Diego have
been skyrocketing. A recent article in the Union Tribune
reports, "San Diego County's red-hot real estate market
continued to sizzle last month, with the median price of
existing homes soaring nearly 33 percent from a year
earlier to a record $520,000 and sales reaching a level not
seen since 1988.
"But while statistics released yesterday revealed few hints
of a cooling down in the market, local real estate agents
say they are seeing signs foreshadowing a slowdown - but
not a drop - in escalating prices.
"Home builder Steve Doyle of Brookfield Homes suspects
that many people who planned to use increased home
equity to trade up to larger homes already have done so.
He also believes that some real estate investors have been
frightened away from the market by ongoing speculation
that an inevitable bursting of a real estate price bubble is
To tell if you're buying into a bubble, compare the
condo's selling price to what it would rent for
How do you know if you're buying into a real-estate
bubble? Real-estate agents and others who make money
from condo sales will always find ways to play on your
hopes and fears and encourage you to act irrationally.
Economists offer a rational way to tell if you're buying into
a bubble: Compare the price a home or condo sells for to
the price it would rent for. During bubbles, selling prices
get out of line with rental prices.
An article in the September 9, 2004 Economist, The sun
also sets says, "America's ratio of house prices to rents is
at a record high, 26% above its average over the 25 years
to 2000. To bring the market back to fair value, prices
need to fall; alternatively, if rents continue to rise at their
recent pace, prices will have to stagnate for as long as
eight years."
Several articles in the May 29, 2003 issue of The
Economist provide an in-depth analysis of real-estate
bubbles. If you're a member of the San Diego Public
Library system, you can view the articles in the issue on-
line for free. To read excerpts from some of the Economist
bubble articles and from a study by Michael Youngblood,
click here.
Money Magazine has an article on real-estate bubbles
entitled Will it last?
The Federal Reserve Bank of San Francisco has an article
entitled House Price Bubbles.
Where will prices be when you're ready to sell?
You may feel that now is a good time to buy, in part,
because mortgage rates are low. But what about when
you're ready to sell? Where will mortgage rates be?
If, in the next few years, interest rates rise, then mortgage
rates will be higher. Your prospective buyers will be less
able to buy the investment property you have up for sale.
They will offer you less for it.
The people who know Pacific Shores best— the
tenants— aren't buying
As part of their condo-conversion plan, Pacific Shores
offered tenants a $5,000 discount on the purchase of a
condo. In today's real estate market, tenants easily could
have obtained mortgages and bought condos. But very few
did. Why? Because we know the building, its asbestos
problems, and the din of noise that builds up in the
courtyard. And tenants aren't buying because we know the
business practices of Pacific Shores Condominiums and its
parent company Pacifica.
Be in touch
If you find this information useful or valuable or if you
would like to comment on any of the information provided
here, send me an e-mail or call me. If you have
experiences with Pacific Shores, with the Israni's, or with
their employees that you would like to share with others,
let me know about them in an e-mail.
Jerry Marlow
Tenant, Pacific Shores
(619) 987-3599

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