The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1902-07-20

the plans and figures saw the skin on the
back OF his head begin TO shrivel up. He
said, whiningly. that the boarding houses
ever town had a good deal Of trouble as it
was getting $3.50 a week for table board
and the drummers all went down to Indian
apolis TO stay over night. / tried TO ex-
plain to him that II was entirely out OF
competition with any clearinghouse trade,
and the reason drummers went down to
indianapolis to stay all night was there
were no decent accommodations In this
town, but il was no go
After a few cold baths OF this sort we
lad up for six months, and the only assets
OF the hotel company were a set Of plans,
an incorporate seal. a minute book, some
stock certificates and an option on the
ground. We finally worked it out this way:
1t was a 100000 proposition. not including
the ground. 1 went back TO the old lawyer
who owned the ground and had the option
changed to a ninety-nine-year lease, with
an annual growth rental of 81, 700, with a re-
appraisement after ten years. In addition
1 gave him three rooms and a bath in the
MOTEL for himself, wife and their direct de-
scendants for ninety-nine years. a fine es-
tate, by the way; you never can starve
out this family
w had Incorporated the company for
100000 common stock and $4,000 preferred
stock. By personal solicitation we sold the
preferred stock to small investors at par
$1,000 here and $500 there. We issued 100000
worth of forty-year bonds bearing 3 per
cent annual interest. In order to guaran-
tee the principal Of these bonds at the ex-
piration Of forty years W. insured the lives
OF four men-twenty-one years old-(so as TO
get the benefit of the lowest rate OF insur-
ance) for $4,000 each, OF 100000 in all. These
were single premiums. nonparticipating,
pa1d-up policies, and II took $4,000 OF the
money realized from the preferred stock.
This was done on the same principle one
might deposit s29, 900 at compound interest
for a period of forty years and by comput-
ing the interest at 31a per cent. it would be
seen, after the end of the forty years, it
would more than equal the face of the
bonds. In addition to the guarantee Of the
principal we gave a blanket mortgage on
the entire property to secure the payment
of the interests s~emi-annually. 1 borrowed
50 per cent. Of the face Of these bonds to
cover the construction period of a trust
company in Chicago and finally sold them
at 80 TO the same company. The balance of
the money from the preferred stock. after
paying for the guarantee, was used for dis
count on bonds, interest and ground rent
while building and other carrying charges.
PREFERRED STOCK.
1--WE gave preferred stock TO the manager
OF the hotel for the amount he had put up
for furnishings. We divided the common
stock with him which we had kept our
selves so that he was equally interested
with us in the good management of the
property and making it a hotel proposition
rather than one of real estate.
The trust company which bought the
bonds is the trustee of the enterprise, so
that no officer in the hotel company re-
ceives any salary except the manager. No
dividends are declared on the common
stock, but all the earnings of the business
go TO pay fixed charges, such as taxes, in
surance, repairs. 5 per cent. interest on
bonds and 8 per cent. interest on preferred
stock. The net income is used TO retire the
preferred stock. You see it was not neces-
sary to provide any sinking fund for the
bonds on account of the guarantee, and 1
figure at the present rate of business that
the preferred stock will be retired in about
ten years.
1T is impossible for the small investor to
get mortgages any more, as they are all
snapped up by the big ~loaning companies
and a preferred stock like this is an ideal
security for them. as it is nontaxable, nom
assessable. guaranteed 8 per cent. invest
ment. In fact, it is the same as the note
of the company and subject to the same
processes of law in case of its delinquency
Of principal or interest.
From a public spirited standpoint and
on general principles these enterprises are
commendable, as they build up a town, give
the investor what he is entitled to and dis
tribute money by giving employment TO a
large number of men for long periods. For
in the past have been carried out by men
of large individual wealth, and the only
way for those of moderate capital to cope
with them in the present tendency towards
consultations, and receive the benefits, is
by cooperation through the mediums of
the stock companies.
by carrying out an enterprise on a large
scale it can be erected and maintained more
economically. The same amount of land
and the same amount of roof will do for
five stories as for one. A large heating
plant and lighting plant can be operated at
a relatively less cost than a small one, to
say nothing of the reduction of insurance,
taxes and other fixed charges"