Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: v. 82, no. 2105: July 18, 1908

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July i8, 190S RECORD AND GUIDE 121 ^ ^ ESTABUSHED-^tfiWVCH2iy^l868. DlVo-jED TO Re\L EsTAIE . §U1LDI^''C T^^FiCKlTECT JRE .KoUSEHOU) DEGQRjnorf, BUsit^ESs Alio Themes OF GEfJER,Al IKterest. PRICE PER YEAR IN ADVANCE EIGHT DOLLARS CoDamunications should be addressed to C W, SWEET Published EVery ySaturday By THE RECORD AND GUIDE CO. President. CLINTON W, S'WEET Treasurer, F. 'W. DODGB ■yice-Pres. & Genl, Mgr., H. W- DESMOND Secretary, F. T. MILLER Nos. II to Io East 24tli Street, i\vw Vorl£ Cllr (Telephone, Madison Square, 4430 to 4433.) "Entered at the Post Office al New Tork. X. Y., ns scoixl-class matter." Copyrighted. 1908. by The Record & Guide Co- Vol. LXXXII. JULT IS, 190S- No. :2105. THE nature and limits of the business revival tliat is now under way are written on the face of tlie returns. Peoiile who expect a sudden and rapid resumption of tlie conditions which prevailed in 1906 and early in 1907 will he deceived. The conditions which prevailed in 1906 were not normal. They represented "an expansion of business activity wliich strained the resources of the country, botli in tabor and capital, and which encouraged extravagance both in business methods and in personal expenditure. To expect, consequently, that business will at an early date become as active as it was eighteen months ago is to expect something which cannot and should not occur. A return to normal con¬ ditions will mean rather the transaction of an amount of business nearer the level of 1905 than that of 1906 aiid these comparatively normal conditions should prevail at least for another year or more. During this time capital can be slowly accumulated, labor can be disciplined and improved and business methods can, whenever necessary, be thoroughly reorganized. The severe deprivation and the rigid economy which were forced upon so many employers and employees last winter will not be necessary, but on the other hand, there will be no excuse for basing an excessive expansion of credit U'pon an unwholesomely large volume of business. The sort of confidence characteristic of periods of e.Ktraordin- ary prosperity is of slow growth, and it will hardly be re¬ stored during 1909. Mr. John W, Gates, when he predicted the postponement of the next "boom" in the iron and steel business until 1910 was probably not far wrong. The finan¬ cial situation of the railroads alone would be sufficient to prevent the earlier occurrence of such an event. Railway earnings are improving, but they are improving very slowly; and as they improve the railroads will find abundant use for their increased receipts 'without spending them upon per¬ manent improvements- The drastic reductions in operating expenses which has been characteristic of railway reports since March has been accomplished in many cases at the expense of the proper maintenance of railroad property; and as the earnings increase, operating expenses will have to be increased to even a larger extent. The consequence will be that no substantial improvement in net earnings, without ■which the credit of the railways cannot materially improve, is to be expected for a long time- to come. THE improvement in the net earnings of the railroads is irnquestionably a condition, not merely of a revival of great prosperity, but even of the permanent restoration of substantially normal conditions. The financial reverses of 1903 were most acute in the case of the industrial cor¬ porations. The reverse of 1907, on the other hand, laid the heaviest tax upon the holders of railroad securities; and the effect has been decidedly to injure the credit even of the largest and best managed systems in the country. Their credit has of late been in some measure restored, but it has not been restored to any sufficient extent. It is impossible for the railroads to prepare for a revival of business by adopting a policy of liberal improvements because it is still impossible for them to obtain money on really economical terms. Moreover, even a plethoric condition of the money marl;et will not help the railroads very much, because ju«t at present they have not the security to offer. Tbey are not m a position to increase their net earnings, even if they are able to transact an increasing voltime of business, and in case tiiey made large issues of bonds under such conditions, it loolrs as if the stockholders would have to pay the interest on such securities. It is reasons of this kind which give strength to the claims of the railroads for an increase of rates, and the arguments in favor of such an increase can be boiled down into a comparatively few sentences. An improvement in the credit of the railroads is a condition of any permanent or substantial business recovery for two reasons. In the first place, unless the railroads are liberal in their expenditures, no considerable prosperity in the great basic metal industries of the country is possible. In the second place, the railroads could not handle the business created by another and greater period of prosperity unless they are in a position to make liberal provision for more double-track, more sidings, more equipment and better ter¬ minals. If their credit remains bad a revival of business M'ould find them unprepared, and there would be the same complaints about shortages of cars, delays of shipments and general inadequacy of service as arose in 1906 aud 1907, In spite of the enormous capital expenditures of recent years the railroads are really not in a position to handle the vol¬ ume of business created in periods of prosperity, and they cannot raise the money necessary to a policy of liberal im¬ provement without some increase in net income. The best way to obtain such an increase in income is by an increase in freight lates. Such an increase would distribute the burden over the largest possible area, whereas a successful attempt to reduce wages would concentrate the burden upon one class—viz.: upon the railroad employees. It is much to be hoped, consequently, that public opinion will be suffi¬ ciently fair-minded to approve a moderate increase of rates. OUR COURTS have decided that.no appropriation can be made for the Fourth Avenue subway in South Brook¬ lyn until some judicial determination has been reached as to the precis'e debt limit of the city on .Tune 30 of the current year, and so long as this legal prohibition holds, the question about the advisability of the immediate construction of this transit improvement can rest in peace. It will take some six months for the referee to hear the testimony and pass upon it; and during the next six months something may occur, which may place a different complexion on the whole matter. In the meantime the people of the city are to be congratulated upon the prospect of a judicial determination of the precise amount of the debt margin. Tb-ere is no rea¬ son to suppose that the comptroller's office has made a false calculation, but the financial officials themselves are in doubt whether certain items sho"ld or should not be iuc.l,iued. Such questions are enormously complicated and extremely technical, "'^"J a court review of the whole matter will be of tbe utmost benefit. All disputes as to what the city can or cannot afford to do will then be set at rest, and the men responsible for its financial policy will know precisely what resources they have at their disposal. We are much afraid that, in this, as in so many other cases, the fruits of knowl¬ edge will be pain and disappointment- Nothing is plainer than that the financial resources of the city are wholly inade¬ quate to its responsibilities in the way of really necessary Improvements; and the sooner this fact is demonstrated and its consequences realized, the better, ■p VIDENCES accumulate that capital is going to take ■'--' advantage of tbe comparative economy of building in this city to erect a large number of expensive structures. While the number of relatively inexpensive improvements projected during the first half of 190S is much smaller than they were during tbe corresponding period of 190 7, the number of expensive improvements, for which plans have been filed, is considerably larger. Substantial decreases are shown in the figures for dwellings, tenement houses and the like, whereas large increases may be remarked in the totals for office buildings and hotels. Indeed, if the new Equitable Building is begun during the year, the year 190S will be second to none in the history of the city in its expenditure on skyscrapers. The latest important improvement for which plans have been filed is the new Ritz-Carlton Hotel. There seems to be some doubt whether this building will be erected, or in case it is erected, it will be called the ■■Ritz-Carlton"; but if it should be built in 190S and 1909 its owners would have the advantage of getting a much cheaper building than they could have obtained a year ago or are likely to obtain a year or more hence. Moreover, the proposed site has certain peculiar advantages for an exclusive fashionable hotel. The block front on Madison Avenue, between Forty-sixth and Forty-seventh Streets, is