Evening Star Newspaper, June 10, 1929, Page 15

\ \ / FINANCIAL.' LS. TARFESHAYS - DAV O | .z | Defeat of Liberal Party Is Laid to Proposed Duty on Beef. BY JOHN F. SINCLATR. Special Dispatch to The Star. NEW YORK, June 10.—Americans should realize the significance of the surprising defeat of the Liberal party of Premier Gardner of Saskatchewan in the provincial elections last week. To the average American it means nothing, but this party, always friendly to America, has been defeated after holding power for 24 years. In fact the Conservative party has mnever formed & government in Saskatchewan. Why the change? The answer is that the new Ameri- can tariff proposal for higher duties, particularly on beef, has changed the sedtiment there. The Conservative party’s position of putting up “brick for brick” against the American high protective tariff has gained ground. To the Middle West it means more. Premier King of Canada may now fight shy of committing his government to any co-operative scheme for the con- struction of the St. Lawrence water- ways route The Canadian premier, always friend- v to the United States, a graduate | of both Chicago and Harvard Universi- ties, as well as Toronto, is likely to ponder the possibility of alienating his | French-Canadian supporters of Quebec, many of whom oppose the St. Lawrence waterways development. And thus tariff-changing has far- reaching_effects. 3 J. H. Thomas, the British cabinet's unofficial minister of unemployment, says very frankly it is going to_cost Britain “some money” to bring relief to the 1,500,000 unemployed of Great Britain. “But it is better to spend money productiveiy than to give hundreds of millions to people doing nothing” s} the statement of this most popular of the Labor ministers Philip Snowden is the man responsible for British government finances. It is expected within the next six months that at least 600,000 men who are at present “tax pensioners” will be am- ployed in productive enterprises. On road building, Thomas expects to spend at least $50,000,000. Other millions will | be put into electrification schemes and the construction of a railroad ring around London to facilitate and speed | up the transportation of goods will be undertaken. The relief of unemployment by & large building and construction program js a Labor program that has already | started, The Liberal party, under Lloyd George, cannot well object seriously to TLabor's_program in this matter, for Tloyd George himself made it his key plank in_ his pre-election pledges. Neither will the Tory party object much. Their position in this matter will be weak, for public sentiment throughout Great Britain is very largely for this part of the Labor party’s program. When Senator Glass, one of the originators of the Federal Reserve sys- tem, proposed that a 5 per cent tax be levied on stock purchases if sold within 60 days, he raised a furore throughout the country, especially in New York City, Chicago, Los Angeles and San Francisco, where stock market opera- tions are large. In this way the Virginia Senatony formerly Secretary of the Treasury Would attempt to control stock mark® speculation. The Glass suggestion has been criti- elzed on the ground that it would actu- ally promote panic at a time when busi- | ness was protecting itself by turning stocks into cash. Those are the times Washington Ticker , By the Assoctated Press. Congressional investigation now im- pending as to the Federal farm loan system is serving to bring into the light of publicity an institution which, in spite of its more than $2,000,000,000 of assets and its Nation-wide scale of or- ganization, has functioned of late in a good deal of obscurity. Both officials of the Farm Loan Board and leaders of the congressional criticlsm make haste to indicate the recent demand for inquiry has little to do with the validity of farm mortgage lending by the system and does not operate to challenge the integrity of the immense quantities of mortgage bond investments outstanding in the hands of the in- vesting public. 3 ‘What seems to inspire the protest, in the view of both the interested legis- lators and board members, is the in- creasing dissatisfaction on the part of a rather large group of people who are stockholders in the complex group of corporations more or less linked to form the system. Dividends on their hold- ings have been limited and prospects for the future are less bright than hoped. “It is true that business men of my State interested as stockholders in joint stock land banks were first to raise the questions about the system which I have taken up,” explained Rep- resentative Louls Cramton of Michigan, who has pending a resolution for the inquiry. “It is my feeling that the board has failed to fulfill its functions and that a situation is growing up that very seriously needs attention. I have asked the rules for a hearing on the proposal and am ready to bring forward witnesses who have knowledge of the facts. It is possible that the House leaders will not feel that the matter can be taken up this Summer, but notwith- stsnding the resolution for investigation will remain alive. And we shall insist that attention be given it at the regular session.” ‘The board itself is now in a stage of transition, Paul Bestor, former president of the St. Louis Land Bank, having just taken the chief executive office, suc- ceeding Eugene Meyer, jr.; but in taking cognizance of the investigation demands, its members are inclined to believe that protests arise from conditions that are in a fair way to be bettered as a result of changed board policies in the last two years. The somewhat complex organization of the system includes 12 regional and federally conducted land banks, which have lent about $1,300,- 000,000 on farm mortgage paper, and some 50 joint stock institutions, private- ly owned, which have outstanding loans of $639,000,000 at the last report. ‘Three of the 50 joint institutions are the hands of receivers, and Mr. Cramton says he would like to know more about’ the condition of some of the others. None of the 12 regional banks is questioned but every farmer borrowing from them is obligated to take 5 per cent of his loan in the form of securities originated by the system, either in the regional bank or in one of the 4,000 neighborhood loan asso- ciations which administer the actual loaning. Rather a small proportion of this stock has borne dividends, and the board's policy has favored the use of earnings to build up reserves rather than to furnish income. WINTER WHEAT CROP. By the Associated Press. ‘The Winter wheat crop this year by States, as indicated by the condition of the crop on June 1, was announced today by the Department of Agricul- ture. The total indicated crop, as an- nounced Saturday, was placed at 622, 148,000 bushels, based on its condition on June 1, which was 79.6 per cent of normal. ‘The indicated production figures and condition on June 1 by important pro- ducing States follow: Indicated Production. Cond. . 20,493,000 9 when it 1S necessary to back up a mar- | ket with buying so that liquidation can proceed in an orderly fashion. such a law in force it would be extreme- ly difficult to get any group of investors to support a market on its way down. One banking authority puts it this way: “For burning the barn to kill the rats, the proposed speculation tax of Senator Glass established a new record.” (Copyright, lfigi-n:ly North American News- o EARNINGS REPORTED, NEW YORK, June 10. (#).—The Ohio River Edison Co., reports net profits for the year ending December 31, 1928, of $1,155,406, equal to $25.11 a share on | g, the 46,000 shares of 7 per cent preferred stock. For the six months ending April 30, the Florsheim Shoe Co. reports a net profit of $1,119,132, compared with $1,116,662 in the same period in the previous year. AMERICAN STORES SALES. NEW YORK, June 10 (P).—Sales of | Beritaer Fa the American Stores Co. of Philadelphia | B for the five weeks ending June 1 | amounted to $13,687,403, compared with $13.479,433 for the same period last |} ‘With | Nebr: NEW YORK, June 10 (Special).— Bid. A Ger Govt Red Loan with drawing oo ctfs attached per 100 R M.... 55.00 60.00 Ger Govt d Loan_ with drawing ctfs per 1000 R M. .. 26.00 3000 o (] North German Lioyd 4'as. Krupp. 5s 1921 Dusseldort 4: Prankfort a-M 45 pi Munich 4s pre-war (Quoted in_d A E G (German Ge Elec) A E G (Ger Ge Elec) pfd Commerz and Privat Bank. I G Farben. asuzass. s ank Darmstaedter Bank Chem_xd #ERmGs =0 8333333333833-5551385353 Full Co-operation CUSTOMERS of standing can invariably count on the full co-operation of this bank. It is such service' that has brought prestige to the Metro- politan—and profit to t"~se favoring us with their bus: s. 3% Paid on Savings National Metropolitan Bar': Oldest National Bank in District of Columbia 15th St., Opposite U. S. Treasury For a Safe Investment REAL ESTATE NOTES Secured by High-Class Improved Properties Competent Appraisals 6% Interest Consult WEMB_BRO REALTORS 809 15th St. N.W, Main 9486 THE EVENING STAR, WASHINGTON,” Properties Behind Smith Offerings— No. 8, The Cavalier of Washington, D. C. ." ¢, MONDAY JUNE 10, '1925. For the information of the The Cavalier of Washington, rINANCIAD blic at large and particularly those who may be interesied in C., we invite attention to the following statement relative to this property and to an issue of bonds offered by this House. STRONG SECURITY FOR BONDS The Cavalier of Washington, D. C. NE of the soundest forms of investment is that which is secured by real estate—land chosen with a view to future as well as present values—buildings thereon that are adapted to a known rental demand. THE CAVALIER OF WASHINGTON, D. C., constitutes strong security for an issue of bonds offered by The F. H. Smith Company, for it occupies a unique location in the important upper Fourteenth Street district of Washington, D. C., one of the most thickly populated residential sections of the city, which is a com- munity within itself. Here is a location chosen with a view to future as well as present values; here is a building adapted to a known rental demand. We believe this section is entitled to a fine apartment hotel and that this building fills a recog- nized need. In fact, there is probably no other section of Washington that is more in need of a well-managed apart- ment hotel than this rapidly growing upper Fourteenth Street community. The F. H. Smith Company has been a pioneer in financing the development of fine properties in the National Capital, not only in this section, but in the down- town business section and in the Potomac Park section. Time and again its sound judgment has been proven. A Smith Offering In November 1928, The F. H. Smith Company offered an issue consisting of $1,950,000 principal amount of 61%4% First and Refunding Mortgage Coupon Gold Bonds, to be secured upon completion of the present financing by a First and Refunding Mortgage on the land and building, including fixtures and equipment, known as The Cavalier of Washington, D. C. The bonds of said First and Refunding Mortgage issue mature serially, the maturities ranging from five to twenty years, so that the issue is to be reduced before final maturity to $1,560,000. There is also secured by this prop- erty a $350,000 615% General Mortgage Bond issue which is subordinate to the first and refunding mortgage, and, until completion of the refunding, to the underlying mortgage. Underlying Mortgage The lien on this property which underlies the First and Refunding Mortgage consisted originally of $1,400,000 63,% first mortgage bonds dated April 1, 1926, an equal principal amount of the first and refunding mortgage bonds being held by the Trustee under the first and refunding mortgage and released only as underlying bonds are retired and cancelled. To date (June 7th, 1929) the amount of this underlying lien has been reduced by the re- funding operation to $568,500, as $831,600 prin- cipal amount of the bonds secured by the underly- ing mortgage have been retired and cancelled. Under the terms of the first and refunding deed of trust, the obligor covenants that on or before April 1, 1935, it will cause to be paid and satisfied all underlying bonds. Valuation of Property $3,000,000 The Cavalier of Washington, D. C., was appraised by Ford, Bacon & Davis, Inc., nationally known en- gineers and appraisers, and their certificate of val- uation is quoted below : “Based upon our inspection of the Cavalier Apart- ments, an apartment hotel located at 3500 14th St., N. W., Washington, D. C., we hereby certify that the Estimated Cost of Reproduction New and the Estimated Cost of Reproduction New Less Depreciation of this physieal property, comprising the land, hotel building and fixeg equipment as existing November 1, 1928, based upon prices of materials and labor prevailing in Washington at that date, are as follows: Estimated Cost of Reproduction As of Nov. 1, 1928 New $ 851,950 2,191,050 2,148,050 $3,043,000 $3,000,000 “The value of land shown above has been furnished 10 us by responsible local real estate experts. “The allowance made for depreciation represents the Joss due to accrued physical deterioration, as observed by our engineer. Supersession, due to obsolescence, changes in business conditions, or to any other cause, has not been considered. “The above estimated costs include allowances for cost of financing and such overhead cos organiza- tion and legal expenses, engineering and a hitectural supervision, interest, taxes and insurance during the period of construction. “Qur inventory does not include furniture and fix- tures, miscellaneous equipment, miscellancous supplies chargeable to expe or stationery. “No allowance has been included in our estimates of building and mechanical equipment for any value at- tached to good will, advantage due to location, going concern, or any other elements of intangible property. “FORD, BACON & DAVIS, INC.” Depreciation $851,950 Total . . . Otis Place. and seven stores. It is & mods * Ford, Bacon & Davis, Inc., P A Nationally-Known . Emngineering and Appraisal . rganization The opinion of Ford, Bacon & Davis, Inc., as to the value of this property was sought because their organization has a national reputation for ability and efficiency in this line of work. In response to our recent inquiry, we have re- ceived the following letter from Ford, Bacon & Davis, Inc.: “New York, June 6, 1929. “F. H. Smith Company, Smith Building, Washington, D. C. “Dear Sirs: “In accordance with your suggestion, we are pleased to attach to this letter a folder which con- tains the names of a few of our industrial and bank- ing clients. This, of course, is very incomplete and no mention is made of the very considerable clientele which we have among utilities. It may be of interest 1o you to know that we have recently completed the longest and_ largest high pressure gas line in the country, and that we are now carrying forward an- other similar enterprise in the South of even greater length. In addition, it may be of interest to you to know that it is not long since we completed the Pontchartrain Bridge, which at that time was the longest bridge o{ its type in the world. Our work has not only included projects of this character, but also harbor developments, irrigation systems, power house design and construction, electric street railway and utility operations. We believe any large finan- cial house in the country is familiar with our work. “Very truly yours, “FORD, BACON & DAVIS, INC. “By (Signed) Harmon Laughlin.” Some of the nationally known investment banking houses and industries which have used Ford, Bacon & Davis, Inc. service, taken from the folder referred to in the above letter, are: J. P. Morgan & Company Standard Oil Co. of New Jersey Kuhn, Loeb & Co. S. W. Straus & Company Hornblower & Weeks Blair & Company Bonbright & Company Cassatt & Company Chase Securities Corporation Dillon, Read & Co. Eastman, Dillon & Co. Hallgarten & Company ‘W. A. Harriman & Company Hambleton & Company Harris, Forbes & Company A. B. Leach & Company Hemphill, Noyes & Co. J. & W. Seligman & Company Spencer Trask & Co. Armour & Co. Fox Theatrical Enterprises J. 8. Bache & Co. E. H. Rollins & Sons G. M. P. Murphy & Co. First and Refunding Mortgage Refinancing In General First and Refunding Mortgage Bond issues, as the name implies, are utilized when a property is refinanced, it being necessary to retire exilth\{. liens during the period of re- financing. Consequently, First and Refunding Bonds are subordinate to the underlying liens until the obligor has retired such underlying liens. Under the terms of the Deed of Trust securing a First and Refunding Bond issue, bonds of such issue in excess of the amount of the obligations secured by all underlying liens are issued for sale at once, but the remaining bonds of such issue being equal in prin- cipal amount to the obligations secured by all underlying liens are not released at once, but are held by the Trustee named in the First and Refunding Deed of Trust. As the obligations (bonds or notes) secured by the underlying liens are retired and cancelled, bonds of the First and Rehmdinfi issue in equal amount are released by the Trustee. When al of the underlying liens have been retired and released the First and Refunding Bonds become complete First Mort- & gage Bonds. or of Washington, D. C., eccupies the entire frontage on the west side of Sireproof apartment hotel. Apartments range in size from one room and bath (o six rooms and two baths. * * N.W. ‘ourteenth Straet, Northweat, from Ouk On the firat floor there is @ spacious lobby, & publie dining room Estimated Farnings as a Basis of Valuation The earnings to be derived from a property which is properly adapted to the purpose for which it is to be used constitute a most important factor in the basis of valuation of the property. The earnings to be derived from The Cavalier of Washington, D. C., as estimated by The Cavalier Corporation, owner of the property, are given below. This estimate is a part of the representations made to us by the owner: $ Gross annual earnings of The Cavalier Apartment-Hotel from all sources (including restau- rant) with full rental would be. Allowance for vacancies Allowing for operating expenses, including taxes, insurance, re- placements of furniture and equipment, payrolls, restaurant, advertising, laundry, house sup- plies and other expenses 137,000.00 159,347.00 Leaves an estimated net annual b income of * $209,750.00 The estimated net annual income of $209,750 be- ing approximately 7% of $3,000,000 is an excellent return on the valuation of this type of property. These estimates were based upon the plan of the owner to convert a majority of the apartments into furnished apartments with hotel service, which, in the judgment of the owner, will produce the maxi- mum income that may be obtained from this build- ing considering its unique location and other advan- tages. It is estimated by the owner that between November 1, 1929, and January 1, 1930, the prop- erty will be approximately at its maximum income, since the management is not renewing any leases on one, two or three room unfurnished apartments, but is installing furniture as rapidly as these unfur- nished apartments become vacant, Rental Plan The rentals under the plan upon which the above estimate of earnings was based compare favorably with those of other well-managed apartment hotels in Washington. Rentals were estimated as follows: (The furnished apartments have complets hotel service while the unfurnished apartments do not.) Per Year $369,597.00 $22,847.00 5 apartments of 1 Room and bath fur- nished, at §82.50 $4,950.00 81 apartments of 2 Rooms, containing ves- tibule, living room, dinette, kitchenette, dressing closet, Mn?hy bed and bath (some with porches) furnished, at $93.50 ‘per month 75 apartments of 3 Rooms, containing ves- tibule, living room, bedroom, dinette and kitchenette, dressing closet, Murphy bed and bath (some with porches) furnished, at $123.75 per month 0 apartments of 4 Rooms, containing ves- tibule, living room, bedroom, dining room, kitchen and bath (some with porches) unfurnished, at $110.00 per month 25 apartments of 5 Rooms, unfurnished, containing vestibule, living room, two bedrooms, dining room, kitchen and bath (some with porches) at $126.50 per month 2 apartments of 6 Rooms, unfurnished, con- taining vestibule, living room, three bed- rooms, dining room, kitchen, 2 baths and porch, at $160.00 per onth In addition there are seven stores which the owner estimated will yield $9,000 per year and a dining room which it estimated will produce a gross income of $72,000 a year, based upon daily receipts of $200 per day, thirty days per month, when the property is in complete hotel operation. The above rental plan aggregates $369,597.00. 111,375.00 39,600.00 37,950.00 Smith offerings of real estate mortgage bonds are fundamentally sound because they are based upon well located real estate—land chosen with a view to the future as well as present values— buildings that are adapted to a known rental demand A\ THE F. H. SMITH COMPANY Investment Securities — Founded 1873 SMITH BUILDING (815 15th St., N. W.), WASHINGTON, D. C. Branch Offices in Other Cities 4