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TMovember 13, 1909
RECORD AND GUIDT^
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ESTABUSHED^ rfjWpH 81^'^ 1868.
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Birsnfcss Aito Themes of Ge|1er^I lifreR^i^
PRICE PER YEAR IN ADVANCE EIGHT DOLLARS
Communications should be addressed to
C. W. S'WEET
/ Pablisfied Every Sotarday
By THE RECORD AJVD GtUDE CO.
President, CLINTON W. SWEET Treasurer, F. W. DODGE
Vlce-Prea. fi Genl. Mgr., H, W. DESMOND Secretary. F. T. MILLER
Nos. 11 to IS Baat 24tb Street, New York CEty
(Telephone, Madison Square. 4439 to 4433,)
"Entered at the Post Office at Ncio York, N. Y., as scconi-class matter."
Copyrighted, 1009. by Tbe Record & Guide Co.
Vol. LXXXIV.
NOVEMBER 13. 1909.
No. 2174
THERE CAN BE NO DOUBT that until recently the vol¬
ume of the real estate business developed during the
^Tall was elisappointing. Both in the aggregate number oC
sales reported each week in the Record and Guide, and in
the aggregate number of recorded conveyances there was a
£ailiiTig off from the totals of the corresponding periods lasC
year. The same statement is true in respect to the mort¬
gages recorded and the amount they involved. Even the
building plans filed during October carried with them a much
smaller expenditure, at least so far as Manhattan was con¬
cerned, than did the plans filed during October, 190S. Hence,
it looked as if, during a period in which genera! business was
rapidly expanding, the real estate business was becoming less
active than it was during a previous year, when it was
embarrassed by the turmoil of a Presidential election. The
situatinn vi'as not, however, wholly discouraging. Even if
the volume of business was not very great, its quality was
unexceptionable. A certain number of substantial invest¬
ment purchases appeared constantly iu the returns. Wher¬
ever building was active, as on Washington Heights, or in
the new wholesale district, a steady demand could be re¬
marked for available building sites, A number of large
operations were put through, involving the leasing of valu¬
able corners by business men who proposed to improve their
acduisition with modern buildings. There were evidences,
consequently, of a wholesome demand, in all parts of the
city, in which values were established; and the inference nat¬
urally was that the smaller volume of activity was due rather
to a stiffening of prices rather than to a lack of demand.
And such, indeed, has undoubtedly been the case. From
October, 1907, until the present Fall a man who wished to
sell real estate in New York was usually obliged to do so. if
not at a sacrifice, at least at a price that did not represent
bis idea of the full value of his property. Of course, there
were exceptions to this rule in certain favored streets and
avenues, such as Fourth avenue and West 27th street; but on
the whole it was none the less true. This Fall, however,
sellers began to feel that they could increase their demands,
and naturally the flrst result of this attitude was a di¬
minished volume of trading. But to judge from the
reports of the past week, would-be purchasers are beginning
to realize that property in active speculative districts is
worth all that is being asked for it. Within a few days
there changed hands two large plots on Fifth avenue, one
each in Fourth and Madison avenues, and four large par¬
cels near the Pennsylvania Station, All these operations
affected property in the heart of Manhattan, and it looks
from this sample that the volume of buying In the district
between 23rd and SOth streets. Seventh and Fourth avenues,
would obtain during the current year unprecedented dimen¬
sions and momentum.
ONE OF THE MOST INTERESTING and significant de¬
velopments in real estate methods in Manhattan of late
years has been the increasing practice of securing desirable
plots by long leases other than by purchase. Until recently
the leasehold has never been a popular manner of giving or
getting possession of real estate in New York; and there
used to be a tendency to attribute the rapid process of
building reconstruction in Manhattan to the fact that very
little desirable ground was tied up on leases which left the
owner unable and the tenant unwilling to erect thoroughly
modern buildings. Of course there were Astor, Snug-Har¬
bor and other leaseholds, but they were usually referred
to as examples to avoid rather than to imitate. Of late
years, however, the popularity of leaseholds has suddenly
and remarkably increased-—particularly in the heart of the
new wholesale, retail and amusement district; and the rea¬
son for this change of method is worth some consideration.
Neither is tins reason very far to seek. It is dependent
on the fact that speculators or business men wish to secure
for a long period peculiarly desirable or valuable plots
without putting up the capital required by their purchase.
Until recently neither conditions nor values in the middle
section of Manhattan were such as to make leaseholds desir¬
able. Excellent corners could still be bought at compara¬
tively modest prices and retailers had not understood the
necessity of anticipating the movement of trade and of secur¬
ing in advance some desirable strategic advantage in the
future battle for retail trade. When they did wake up
to the fact that a retail business of a high grade could not
get along without a permanent and central location in the
new district, speculators and certain particularly shrewd
business men had already been aroused to the opportunity
and the real facts of the situation and had forced prices up
to a very high level. Not only had many peculiarly desir¬
able corners already been captured, but many more, like the
old Hotel Bristol, at Forty-second street and Fifth avenue
had been appropriated under long leases by speculators and
taken out of the market. What, then, was to be done?
None but the most opulent retail or wholesale merchant
can afford to take anywhere from $500,000 to $1,500,000 out
of his capital in order to purchase a site required by his
business, and the ordinary business man had, conseciuently,
a strong inducement to obtain the property he needed if
possible under a long lease—in which case the only capital
required to be invested in the operation would be a part of
the cost of the new building. Such are the motives that
are responsible for all leases similar to the one recently
secured by W. & J. Sloane on part of the Windsor Court
block.
A SITUATION PRECISELY SIMILAR to that described
above had never been created in the only other sec¬
tion of the city in which values had reached anything like
the same level over so large an area—that is, in the flnan¬
cial district. Of course, in that district the same necessity
had existed for certain banks, insurance companies and cor¬
porations absolutely to secure for themselves one of a few
desirable sites near the junction of Wall and Broad streets,
but the difference was that the banks and insurance com¬
panies could afford to pay any price they pleased for a
peculiarly desirable site. It made no essential difference
to them whether they had one or several million dollars
invested in their office building, provided the Investment
really paid. The consequence was that the peculiarly desir¬
able corners in the flnancial district have for the most part
been purchased outright by the business men or companies
who needed them. But a retail or wholesale merchant can
rarely control resources large enough for similar purchases;
and when the needs of his business demand that he acquire
possession of real estate worth anywhere from $125 to $250
a square foot, he must contrive to do so without paying for-
it in cash. The leasehold is thus very advantageous for
him. in that it does not strain his resources, while at the
same time it constitutes a peculiarly desirable form of se¬
curity for the owner of the property. The owner obtains
an income estimated usually at five per cent, on a liberal
appraisal of the property at the time of the lease, and this
income is secured by the value of the modern building which
wiil be erected thereon. Considering the nature of the
security, and the subsequent irresponsibility of the lessor,
the income should apparently be estimated on less than a
five per cent, basis; but it must be remembered that the
owner Is surrendering possession of his property for at least
twenty-one years, often without any increase of rental dur¬
ing that period; and his five per cent, means in part an an¬
ticipation of an increase value during the flrst period cov¬
ered by the lease. It may be added that these transactions
are usually consummated among people who thereafter keep
their property out of the market. The owner has a larger
income'on a better security than he can obtain in any other
way, and the tenant has a site which he needs for purposes
essential to his business. Thus the property is permanently
sequestrated, and such is the case even though the tenant is
a speculative operator rather than the actual user of the