Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: v. 51, no. 1298: January 28, 1893

Text version:

■)iH1uar,v3M ^ 3 Record and Guide. 113 Be«6teB io R^t- Estate . BuiLoiKg A^cidTECTdi^E .Houscrfou) DEQORATlflfe PRICE, PER TEAR IN ADVANCE, SIX DOLLARS. Published every Saturday. Tklephonb .... Cortlandt 1370. Communicationa should be addressed to C. W. SWEET. 14 & r6 Vesey St. J. 7. LINDSEY, Business Manager. ■ Entered at the Post-office at New Vork, N. F.. as second-class matter.'''' iutioducetl 11 tinner tunc ititii stock operations 6d the exchanges both of Berlin and Vienna. VOL. U. JANUARY 28 1898. .-^o. 1.208 THE bear party in the stock market has, much to its own chagrin anil discomfort, very materially lielpcd the bull movement- There were signs that the market would drift into dullness until operators on the short side, believing that gold shipments would create a scare, put out large lines in the industrials and got caught. The obstinate ones who have refused to cover do so in the hope that Congress will still order an investigation of these large business combinations before adjourning. The likelihood of this Congress doing anything but squander the time until dissolution is very remote. When once covering has been compelled it is probable that a period of hesitancy and waiting will follow. This is usually the result of such a piece of excitement as this week has seen. It will not follow that the bull market is at an end. Railroad securities have not as yet participated as much as they should do in the advance seeing tbe business that is before them this year, and as that business will be discounted a good while ahead of its occurrence it is reasonable to expect that railroad stocks will go up now. If they do not it will show that pe^i^le do not understand the change that has taken place in the intrinsic value of railroad securities by reason of the small amount of new mileage built in the last five or six years. When they do wako up to this fact their confidence is as likely to be overdone as their indifference now is. THE figures recently published of the state of the industry of manufactm'ing cotton in England serve to explain the stub¬ born insistence of the manufacturers in reducing the wages of their wcrkingmen. When it does not pay to operate a mill, the owner thereof need not feel very bad at the necessity of shutting down ; and it is literally true tbat more money has been lost than made in this branch of trade during 1892. The returns for ninety-nine joint- stock cotton spinning companies show profits of about £70,000, and losses of about £164,000. These companies have a total capitaliza¬ tion of about £7,300,000, of which half is borrowed money and half is share capital. The borrowed money, of course, received its interest; and if from the amount nf money paid out as interest is subtracted the net loss on trading, the residue gives three-fom-ths of one per cent, as the amount of money earned upon the whole capital. In view of this'fact the history of these same companies for the past few years is interesting. During the year 1890, instead of losing £94,000, they cleared £383,000, but 1-90 was by far the beat year for a decade. In 1891 the average profit to each mill was £383; in 1890 itwas£4,220; in 1889 it w.is £2,565; in 1888 it was £i,925; in 1887 it was £98'i, while In 1886 the trading showed a loss nearly equal the loss of the past year. It might be thought that an industry, the returns of which fluctuate so widely, would at its best earn asum large enough to compensate the shareholders for all loss during the off years : but tbe figures given above would indicate that even in the most prosperous times fhe returns on the capital invested in English cotton spinning are comparatively small. Perhaps, however, the mills whicli are operated by joint stock companies are not the richest and most profitably managed mills in the trade. After such an exhibit, it is scarcely likely that the strike of the operatives, to avoid lower wages, will succeed. Tbe Hungarian ministry have finally been successful in coming to an agreement with the Rothschild syndicate, concerning (he loans for the conversion aud the currency reform. The result of the negotiations is that tiie Hungarian Covrrnment emits an irredeemable loan, free of taxes, and bearing interest at 4 per cent, for the redemption and conversion of the 5 per cent Hungarian note Rente and a large amount of railway shares and debentures. Of the total amouat of 1,020 million crowns the Syndicate undertakes the half immediately and the rest at option during the period fixed for th'? h^tal operation. But it is bound to . undertake the second half also. The success of the conference has WHEN Comptroller Myers some weeks ago came out with a letter declaring that in case the Manhattan Company was granted any additional privileges it ought to be made to pay for the same, the newspapers unanimously applauded this suggestion. They all assumed that it would be the simplest matter in the world for the Commission to place an exaet value on the property of which it was disposing ; and they all assumed that in this way the city would not lose anything by the bargain. The Suening Pos( gave exijression to this assumption in the following words: "The only way to meet this problem is to exact conditions beforehand by which the city shall reap a profit by way of a tax or by a percentage of the pross receipts commensurate with the gains of tbe enterprise. This may easily be secured now." We take the libertyof doubting whether the process of securing a percentage of the gross receipts " commensurate with the gains of the enter¬ prise " can be secured as " easily" as the Post and its meaner con¬ temporaries imagine. In what way can the Commission determine what percentage of the gross nceipts should be demanded!' The valueof property offered for sale is generally determined in either one or two ways—either by its cost of production or by the demand which exists for the property in question. In the present instance, of course, the Commission is not disposing of any¬ thing which po-ssesses a calculable cost of production; and even if the franchises had a cost of produc¬ tion which could be calculated, it would be uselfss in guid¬ ing the action of the Commission, because the cost of production determines value only under the leveling action of competition. In the present instance, as the Post admits, the franchises to be dis¬ posed of are in the nature of monopoly value which is determined by the demand existing therefor. For some of the privileges in question, such as the third tracks on the present structure, the various connections between the east and west side lines, etc., the only possible purchaser is the Manhattan Company. Perhaps that corporation will be willing to pay a little something for the opportunity to make more money offered by the privileges which it wants; but imder the circumstances it is ridiculous to suppose that the city will be able to get a tithe of what those privileges will be worth to the Manhattan Company, neither will the city be verv much better situated in the matter of selling a franchise for a new elevated road, independent of the Manhattan Company, and running north and south from the Bat¬ tery to Inwood. Let us suppose that a legitimate competition took place for such a franchise. The sum which the city could[get would be determined, not by its value to the Manhattan Company, but by its value to au independent corporation. Yet, obviously such a franchise could be operated so much more profitably as a part of the Manhattan system that in time it would surely be joined to that system; and the percentage of gross receipts which the eity was gftting would be uo more •■commensurable with the gains of the enterprise" than the cost of the canvass and paint would be " commensurable" with the value of a painting by some celebrated artist._____________ THE Rapid Transit Commission has not got au easy task in dis¬ posing of these franchises for anything like their real value. In truth it has a task which it will find quite impossible to perform. The way it will be performed can easily be predicted. The Com¬ mission will selecta percentage of the gross receipts that will sound ■well to pronounce. This is what the Comptroller did in disposmg of the franchises of the Lexington avenue and Ninth avenue roads to the Broadway syndicate. He had no reason to suppose that 5 per cent was in any way " commensurate with the gains of the enterprise," because he did not know what the gains of the enter¬ prise would be, aud because, as a matter of fact, these gains are not a constant but an ever-increasing percentage of the gross receipts. In the same way the Rapid Transit Commission will not have the remotest idea of the actual value of the franchises ; and conse¬ quently it also will have to choose some percentage which makes a good appearance. The newspapers are easily satisfied in these matters. They did not raise a word of protest against the Comptroller's prejudice in favor of 5 per cent. One might have thought from the silence which the editors of om- daily jour¬ nals preserved upon the matter that the sale of the street railroad franchises had been conducted upon the most approved businesH principles. Numerous other instances can be pointed out of their willingness to accept gratefully in the name of the public any little trifle which these monopoly privileges can be sold for. Recently the Brooklyn City Railroad offered the magnificent sum of 1^250,000 for the permanent possession of something like fifty miles of ytreets in that city, and the newspapers actually congratulated the people on the" possibility of getting these few thousands. It is no wonder that a traction company propose to inject $5,000,000 or $6,000,000 of water into the capitalization of that company, which is already more than half fictitious. Another instance of the same complaisance may be found in the East River Bridge Bill,