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Real estate record and builders' guide: v. 73, no. 1889: May 28, 1904

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May 28, 1904. RECORD AND GUIDE »i4j I rtablEO 10 Real estate . BUILDIJ/O lft;R.aflTECTUI\E .KoLsnioiD DEeaF(AT10t(. Busiifess Alio Themes op GETlEi^l IStei^est, PRICE PER YEAR IN ADVANCE SIX DOLLARS published eVerp Saturday Communications shouUi lie addressed to C. W. SWEET, 14-16 Vesey Street. New YorR J. T. LINDSEY, Business Manager Telophone, Cortlandt 3157 "Bidered al (lie Past Office at New York. A^. Y.. as second-class matter." Vol. LXXIIL MAT 28, 1904. No. 1889. THE proposed readjustment of the securities of the United States Bealty and Construction Company, while it bas not been received with any great enthusiasm by Wall Street, is ap¬ parently very well designed to meet the needs ot the company. The trouble witb tbe existing capitalization is tbat it contains no tilass of securities upon wbicb interest or dividends can under any circumstances be paid. When tbe merger was made, it was doubtless expected that dividends of six per cent, could be per¬ manently paid on the something over $30,000,000 of preferred stoclv; but such did uot prove to be tbe case. After tbe suspen¬ sion of dividends tbe price of the preferred stoclt fell below 40, wbicb is stated to be less than tbe actual book value of the real estate owned by tbe company, and with its securities quoted at sucb low figures, tbe credit of tbe corporation was wrecked and its business operations embarrassed. It was necessary, conse¬ quently, to create a class of securities, upon wbicb interest could surely be paid, and this need is supplied by tbe $13,506,000 new live per cent, bonds. If tbe earnings are sufficient, something can also be paid on tbe $30,000,000 of capita! stocli; but in any event the company would have the advantage of issuing a bond which, in the course of time, would sell in tbe vicinity of par, and wbich it could issue in larger quantities as the business of the corporation demanded more capital. TT is obvious tbat the business of sucb a corporation cannot be *■ successfully managed unless proper means are provided for obtaining continually fresh supplies of cash. In this respect the Realty Company is in the same position as a railroad. In certain instances it buys property, puts up a new building, leases tbe building and sells out to an investor; but as long as its busi¬ ness is chiefly speculative, it cannot expect to gain tbe confidence of inve^ors. Its peculiar function rather is to take advantage of the control of a large capital to buy and improve expensive par¬ cels of real estate, and to perform these operations with sucb good judgment that it can create a value measured in income somewhat in excess of tbe money which the operation has cost. This value can tben" be sold to tbe public in tbe shape of some kind of securities. Sucb a process obviously involves the con¬ stant locking up of capital and, of course, more capital must be obtained to be locked up in this manner. Witb its business con¬ sisting mainly of this character, tbe Realty Co. would be a great investment corporation, and would, in tbe course of time, reap enormous profit from the gradual increase in value of its hold¬ ings. If the reorganization plan goes through, it should place tbe United States Realty and Construction Company in a position to carry on a business of this kind. For almost a year it bas prac¬ tically been out of business, except so far as its construction departraent is concerned. It has sold some property, and it bas made some building loans; but: it bas not been in a position to continue tbese purchases on which its continued prosperity de¬ pended. While it will doubtless be some time before tbe credit of tbe corporation will be sufficiently restored to permit the profit¬ able floating of new securities, still its capitalization is being placed on a basis wbicb, witb conservative management of tbe business hereafter, sbould in tbe course of time enable it to ;Obtain the money which tbe expansion of tbat business demands at an -economical price. The management of tbe real estate end of the business is unqestionably able and well-informed, and sbould in tbe end make tbe corporation realize tbe purpose of its founders. FOR several years past tbe Record and Guide bas chronicled with the utmost assiduity tbe rise of the apartment-hotel. Previously to 1901 such buildings were occasionally built, and, perhaps, a couple of million dollars were invested in tbem every year. During 1901, 1902 and 1903, however, more than one hundred of tbem were erected at a cost not far from $80,000,000. Indeed, during tbese years they were largely displaced high- class apartment houses; and after they were erected, tbey were readily leased and almost as readily rented. Now, however, it is evident that apartment-bouses are regaining their earlier popu¬ larity. During the past week plans have been flled for a ten- story flreproof flat to be erected on Forty-fifth Street, between Sixth Avenue and Longacre Square. This is in tbe very heart of the district in wbich the apartment-hotel was most rampant; and, it must be added, it is also the district in which the apart¬ ment-hotel ia suffering from being somewhat too rampant. Tbe hotels in tbat neighborhood are not all of them doing very well. They bave for the most part been obliged to abandon the policy with wbicb they started, of leasing only by the year, and have become simply big boarding houses. In otber parts of tbe city the situation bas not been so completely reversed as in tbe Long Acre Square district. A number of new hotels are being erected in the block immediately north of tbe new Hotel Brunswick; and this whole neighborhood has suffered much less from the passing of the apartment-hotel than has the Long Acre Square district. Still, the amount of money being invested in this class of structure is not a quarter what it was two or three years ago; and tbe more moderate volume of the bnilding unquestionably corresponds better to the normal demand for this class of resi¬ dence than did large totals of two years ago. The apartment- hotel bas come to stay, but it will not be so important a guest as some people bave supposed. Brooklyn and the Bronx. As the real estate and building season gathers to its prime, the fact becomes more apparent that the area of greatest activity is shifting from Manhattan to tbe outlying boroughs. During 1901, 1902 and 1903 it was the speculative exploitation and reconstruction of Manhattan which was the dominant influence in tbe real estate market. It waa a period of big operations and high prices in wbicb the small operator and the small purchaser bad little or no opportunity. It was ob¬ vious, however, that this was a one-sided development, and that tbe time would soon come when tbe increased prices of Manbattan real estate and tbe aggressive displacement of resi¬ dential by business buildings would compel a redistribution of population and would cause the liveliest kind of a real estate movement in the less expensive boroughs. This movement has begun even in advance of tbe completion of the transit improvements on wbich it depends, and a few figures will show how far it has already traveled. Thus, whereas in Manbattan the number of conveyances recorded so far in 1904 shows only a small increase over tbe number recorded during tbe corresponding period last year, the figures being 6,625 for 1903 and 7,129 for 1904; tbe sum total for the Bronx during the same period bas increased from only 1,725 in 1903 to 2,41S iu 1904, the percentage of gain being about 42. In Brooklyn there bave been 12,357 transfers recorded up to date during the present year, against 8,533 for the corresponding period of 1903, an increase of almost 50 per cent. The build¬ ing figures tell the same story. Plans filed so far in 1904 for new buildings in Manbattan call for an expenditure of $26,647,000, whereas tbe corresponding total for last year was $31,743,000. Thus there is a decrease of about 25 per cent, in new Manhattan building. Brooklyn and the Bronx, however, fully repair this deficiency. There are $5,882,720 being spent on new buildings in the Bronx in 1904 against $2,554,000 for tbe corresponding period of 1903, an increase of more than 100 per cent.; while in Brooklyn tbe plans filed during the current year call for an expenditure of $12,846,000, as compared to $8,949,000 in 1903, the percentage of increase being about 50. If tbe foregoing has been tbe result merely of the promise of better means of inter-borough communication, it may be imagined what may be expected to take place later. Within the year tbe subway will be iu operation and trolley cars will be running over tbe Williamsburg Bridge. Within two years or more the new Bridge will probably have its rapid transit service established and the new tunnel will be whisking passengers un¬ der the river to Brooklyn, Similar improvements will succeed each other rapidly thereafter, and will gradually nullify the obstacles to quick and convenient communication with cheap land which now exist, Tbat these influences can fail to effect a radical and considerable though gradual redistribution of popu¬ lation, is incredible; and the process will undoubtedly be very much accelerated by the upward tendency of Manbattan rents. The owners of the cheaper grades of residential property in Manhattan should be prepared for some years of readjustment, and possibly for some lean years also. The present values of Manhattan residential real estate have been influenced by tbe absence of proper and sufficient means of communication; and