St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1892-02-03
ham at Washington, and both buildings
had to be reconstructed for substantially
thu mo


case was in creating such condition
that dry-rot speedily destroyed the tim
berS, and the buildings had to be vacated
at once. 1t was then discovered that,
in addition to this, the foundation to HOl-
brook Hall, put in by the men who first
obtained the loan, were insecure, and
as a final result the whole structure had
to come down. 1t was then rebuilt un-
der the supervision of McKimmead &
White OH the most approved lines, and
there is not finer structure of its class
III this country today. The absolute loss
tous there was approximately the cost OF
the first building. This we charged off,
and entered the property in our annual
statement at the cost of the present build
ing and ground; the figures. S729, O66,
The appraisers of the insurance depart
ment refused to accept. S4S0,0O0 was
named instead and entered in the insur-
anca departm findings. 1t is proper
TO add that on our present basis of rent
al this property will yield, when fully
rented, net income OF 615 per cent on
the value placed upon il by the insur-
ance department, and would yield a lit
tie more than per cent on our valua-
non, S129,06 / do not desire to evade
full responsibility for myself and the
finance committee in this matter. The
claim Of lnfalliblity in the investment
and reinveStment of hundreds of mill
ons Of dollars is one have never set up.
Fonrth-The Paris property. This
property was purchased some years ago
unoer the supervision of the chairman of
our finance committee. who was Oh the
ground at the time. His investigations
as to the value of the property were
most searching, and the purchase was
made with all due care. That the rental
value OF the property has since depreci-
ated Is true, and that there is an appar-
ent loss is true. But if the superintend-
ent had not only secured an appraisal of
the value of the property as 1t now
stands, but had also investigated the
value of the property when it was pur.
chased, he could have fully satisfied his
duty as an examiner, and at the same
time could have given you as Satisfac-
tory reason for the original price paid.
But no such investigation was made;
and, as his findings seem to do US in
Justice. not only as above cited, but also
III the value placed upon the prop
erty now, the matter will bear
a word more in explanation.
1t was brought to my notice during the
superintendent investigation that the
figures supplied by the department of
taxation OF the French government.
on his request, represented values fixed
solely for his particular purpose. Our
manager at Paris, with great deal of
difficulty, succeeded in getting the Credit
Foncler. the largest institution OF its
Kind Ill France, and society the repu-
tation OF which is we'll known through
out Europe, to have valuation made of
our property. This valuation was made
with the greatest care by two of its
most experienced inspectors, and their
findings, properly attested, were sub
mltted to the uperintendent of inSur-
ance. He preferred, however. inasmuch
as he could not procure, in the limited
time at our disposal, admission from the
French government that its figures rep
resented taxable value only, to
reject the figures offered. In
this way the estimate of the
inspectors exceeds the figures of the
French government by $l63,OOO. and
their estimate of its prospective value,
with the Improvements certain to be
made by the City of Paris. exceeds the
hgures adopted by the superintendent
by 1895, 900. AS | understand it, the
variation in the superintendent figures
from the probable value of this property
is similar to the loss which would ap-
pear if the home Office building of the
Equitable Life Assurance society should
be entered in schedule of its assets at
s.. 600, its value for the purpose of
taxation, and not at SIS, 000 600. its book
value. TO place the property of the
Equitable in schedule of its assets at
such total as to show a loss of SILL
$4,000 would be so unjust as to become
absurd, yet a similar thing seems to
have been done Ill this case.
Five, Oh Western buildings. The re-
port or superintendent of insurance
values the Office buildings recently
erected by us in Minneapolis, ST. Paul,
Omaha and Kansas City at their cost to
the company, but, as his opinion of the
wisdom of the investment seems to be
uncertain, as this language indicates,
there is no immediate prospect that
they (the buildings) will prove as profit
able as the investment of life Insurance
companies should" desire to offer
word i'll that connection. There are
two reasons why the immediate income
from these properties is smaller than
we may fairly expect to receive in the
future First. the buildings begun un-
der normal conditions, but were COM
pleted i'll the midst of a period of bust
ness depression in the four cities men,
toned, and accordingly we have
had fewer tenants and lower rents
hereafter. Second, the buildings
were located with a view to
future developments of their respective
cities. Any one who has observed the
rapid growth of the West will appreci-
ate the necessity of considering the fut-
ure more than the present in the ioca-
ton of ali office building. Present rev.
enue was, therefore. not SO much of a
consideration as that the building should
be so located that the future NAV tend
constantly to increase, and not decrease,
tue rent-procurlng power and value of
the properties. You will understand.
OF course. that investments of this char
acter are valuable because the element
OF risk in reinvestment is practically
eliminated. The money expended i'm
this way is fixed item for very long
period of years. The full wisdom or
folly OF such a transaction is developed
only by time. You will be Interested
to know, however, that one of
these buildings IS already yielding US
fair return on the money invested, and
| am further advised by competent au-
thority that since the date of our pur-
chase of the real estate ON which these
buildings are situated there has been a
net appreciation in its selling value of
S50O,00 as shown by the appraisals
iuduo DIT Tile Close OF 1871, ana by DUR
chase of adjoining property since made
by other people. In entering these prop
critics OH books and in submitting our
estimate of their value to the superin-
tendent, which he accepted, he did
not take this evident increase into ae-
count as evidence that erection of this
chain of these Western buildings was
we'll considered. l point you to the fact
that the investment was entered on after
discussion and approval by the board of
trustees. 1t is my theory that it is only
fair to the members of a company like
this, the nature of whose business
makes large accumulations of money
necessary, that the money to be in
vested should go. as far as practicable,
to those sections of the country from
whence it emanates. In this case part
of the money received was invested
amongst the people who paid it. The
only. theory on which these buildings
can be rated as bad, or even doubtful,
investments is one which discredits the
future growth of the Western states.
The report notices that as advertise.
mantS of the cOmnanv thpv (tha huiId