October 2, 1909





RECORD   AND   GUIDE





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Copyrighted,




1909,




by   The   Record   Sl




Guide




Co,















Vol.




LXXXIV.




OCTOBER 2,




1909.














No.




216S.





THE recent purchase of the Night and Day Bank Building
by the American Real Estate Coiiiiiany is referred to by
one of the daily newspapers as evidence ol" the fact that the
"investment idea is growing among realty corporations,"
Perhaps it is, but that is a very large inference from a very
small number of corroborative transactions. The plain fact
is that the investment idea is not growing among real estate
corporations to such an extent as might have heen anticipated.
In 1901, when corporations controlling considerable amounts
of capital first began to be organized for the purpose of"op-
erating in New York real estate, it looked as if hufee real
estate investment corporations were bound to he the result
of the innovation. These companies 'were indeed formed to
OPERATE in real estate rather than to INVEST therein:
but tlie scale and purpose of (heir operations were sucli that
they seemed bound to become investment, companies. In
many cases they would buy property only to resell it before
or after improvement, but their'speculative transactions in¬
volved so much capital that they could not expect as a rule
to sell tlie bnildings they erected to any one investor. On
the other hand, they might be able to sell them to a number
of investors by the indirect method of the sale of stock or
debenture bonds, and that was apparently the one method,
whereby they could turn over the money sunk iu big building
enterprises. But while tliis process was carried on to a cer¬
tain extent it has not been carried at all as far as was antici¬
pated. The largest of these corporations, for instance, the
U. S. Realty Company, exercised for a number of years a
dominant influence in the development of centrally situated
Manhattan real estate. It purchased a large number of the
best business sites in the Borough, a few of which it sold,
but the great majority of which it improved and retained
as an investment- In this way it became the owner of the
Trinity Building and its half-brother, the Flat-iron Building,
the Plaza Hotel, the Merchants' Realty Building on the south¬
west corner of Fourth avenne and 23d street, the Hippo¬
drome and several other hotels and office buildings. But
there its activity stopped. For four or five years it has al¬
most ceased to be a purchaser of Manhattan real estate, and
since 1907 it has not embarked in any large projects of im¬
provement. The large number of new buiidings in the
course of erection in the middle district of Manhattan are all
being put up either by individual investors or operators, or
by corporations representing either individual owners or the
tenants of the building. In the same way the City Investing
* Company has since 1907 figured In the real estate marltet
chiefly as a seller. For the time being at least these two
corporations are contributing nothing to the improvement of
Manhattan or to the activity of the real estate inarl;et.





THE INACTIVITY of the two large corporations nained
is not likely to continue indefinitely. The time will
come when they will again contribute to the real estate de¬
velopment of Manhattan, It remains true, however, that
during the past few years the share of large corpora¬
tions in the ownership of Manhattan real estate has
relatively diminished; and the question may well be
asked whether they will ever become as dominant an
influence as was at one time expected. One would hardly
dare to answer this question with any confidence; but it cer¬
tainly looks  as  if the  conditions  which  appeared  to  justify





the existence and activity of large investment companies
have become more rather than less important. The ordinary
building opcralinn in (he centra! part of Manhattan deinan:!?
the expenditure every year of a larger rather than smaller
amount of money. It is the big office and loft building which
is most 'economically constructed and operated and most
quickly rented. The number of individual investors who can
afford to put up tlie large sums required to purchase apart¬
ment houses, loft and office buildings of the largest size are
and must remain comparatively few. The ownership of these
structures must in some way he divided or shared. The cor¬
poration that owns only one building is frequently a con¬
venience, but it is rather a convenience to men who both own
and occupy a large building than it is to an investor. The
investor may want to be able to realize on this investment;
and this is difficult when he shares the ownership of only one
building. On the other hand if the company owns many
buildings and possesses a large enough stock to justify its
purchase and sale on an exchange, a machinery has been
created for the conversion of the value represented by these
large buildings into a realizable security. It is extremely
probable, consequently that in spite of the fact that the real
estate investment company has not heen growing as fast as
might have been anticipated, it has more of a future than it
has of a past. Since its inception in 1901 business condi¬
tions have favored speculation rather than investment. Ex¬
cept for short periods following on a business reaction, capi¬
tal has commanded a high price, and conservative invest¬
ments have not liad a fair chance. It remains to be seen
what a period of comparatively eheaj) money will do. There
is a good chance that such a period would iniijrove the rela¬
tive standing of real estate as an investment both in the form
of individual and in the form of divided ownership. At any
rate the policy whicii the American Real Estate Company is
pursuing of buying improved rather than unimproved prop¬
erty is an interesting variation upon the policy pursued by
other large real estate corporations; and its future develop¬
ment will  be watched  wilh lively interest.





IN THE  LAST  ISSUE of the  Record  &  Guide  Ml-.  Charles
Griftitli Moses, made an interesting argument in favor of
the   contention   that   hereafter   the   six-story   elevator   apart¬
ment  house,   100x100   in  size,   would  constitute  the  unit  of
Manhattan huilding.     His reasoning is based upon,  the fact
that the five or six story "walk-up" flat is not profltable on
lotscosting over $12,000; and he sees the day approaching
when   there   will   practically   be   no   lots   left   in   Manhattan
which can be sold as cheap as that.    Owing to  the increase
in the value of land, the elevator apartment-house has come
to   prevail   on  Washingtou   Heights.     There  are  some  thou¬
sands of lots in the Dyckman tract that can still be bought
cheap enough  for improvement with non-elevator buildings;
but Mr.   Moses  predicts that as  soon as  the  building  move¬
ment in  that  neighborhood  obtains  a  fair start,  prices  will
rise, just as they did on Washington Heights, until elevator
buildings of considerable size become necessary.    There can
be no doubt that Mr. Moses is substantially right in making
this prediction.     The  fact that five and  six story  tenements
are not just at present being erected at all in Manbattan does
not,  nf course,  warrant the conclusion  thai  they  will never
be erected again.    The cessation of this class of building is
due to temporary rather than  permanent  causes;   but when
it revives, as it will during the coming spring, the revival will
bo   of  brief  duration.     Land   is  becoming   too   expensive   in
Manhattan for non-elevator building;  and families who wish
to live in that class of building will he obliged in increasing
numbers  to  journey to  the Bronx  or Long  Island-     Within
a few years si^-story elevator apartments will constitute the
cheapest and most popular type of Manhattan building;   but
it must be remembered that even their day will be compara¬
tively short.    Some time within the next five or ten years,
practically all the vacant sites in  Manhattan  available for
this class of improvement will have been occupied:  and in
that case residential improvement in Manhattan will be nar¬
rowed   down  to  the  fire-proof  apartment  house,   erected   on
the site of former private  dwellings.     When that time  does .
come, some modification of the tenement house aud building
laws  will   be   necessary,  in   order  to  permit  the  erection  of
eight or nine story tenements on  60  foot streets, tenements
which will ofljer more resistance to fire than do the existing
six   story   buildings   without   being   thoroughly   fire-proofed-
The  cheapening,   that   is,   of  fire-proof  construction  will  be
essential to the interest of the residents and the real estate
of Manhattan.                                                                                    1