The sun. [volume] (New York [N.Y.]) 1833-1916, 1915-11-14

ne Ntt'.N l' 'a'ffN pun ''' 'N's''u
.r-e ,rc meeting held n few weeks ago.
,ln ars' serious pubic consideration
ira, lending Institutions. builders and
tr,k,rs have given to the plan. There
,,s been talk for years " changing
,,s mortgage system Of New York. but
,hs vas the hrs. real move IN the
direction,
Tn. United states Realty and Im-'
s,oyc,rent company. by far the largest
4, .hls city. is the latest to come out
,or this plan OF m~ortgag,ng. In fact
IRE partial payment mortgage has been
,,rsdered with favor by the company
~ a long time. some time ago George
r Mortimer. vicc-rresident OF the COM
nary. addressing n convention OF build
,sg interests al At,anta on the subject
a, skyscrapers. brought into his talk the
matter Of the yearly payment mortgage.
Waite g.. Clough oc the Fuller Com
ra.v. an auxiliary OF the United states
Hcs,,y and Improvement Company, in
The as, issue Of the Ftudncier says that
,,or, cation il truly the death OF debt.
Applying the principle 10 buildings. es-
t~e,,ally fur banking institutions which
e1r. roncs. he says II solves a prob
=. isr With has Kept them from putting
II structures heretofore.
'"Evcr, hauhins institution saws Mr..
c,ough. would prefer "A large building
IN ,h.cr to do business II this could he
provided wi;hou, the impairment Of is
capital TIE stability which such "A
Na,!din- denotes and the advertising
which sucl an Improvement would give
10 the bank would tend 10 attract de-
rostors 20 IL and therefore add great
= ,s earnings. Eut BY the very nature
o.. rs business IL IL essential thai the
bank assets 20 ne kept in liquid shape.
an IS a consequence II Is often difficult
- france the erection OF Il suitable
building. y plan has recently come
..'J vogue. however. which mates IL
possible TO- q bank 10 obtain "A building
~ tho desired Size without infringing
' a:y " ~" banking laws. This Is done
h. applying the amortization principle
= th- financing Of building operations.
"tn,rus farmers in Europe II has been
"A Istpm for At least ! century IN pur-
,sas.-r lard 70 make u small cash pay
reut and give a mortgag, for the bal
eace dIe. this mortgage to bear interest
ard In" farmer agreeing 20 pay in addi-
ton 20 the annual interest 4 certain In
o. LSed percentage which will at the
eH0i-a'ioN of Il given number OF years
h-1c-tizc his debt.
IN Europe 1t is not unusual 70"
a.a'razation loans to run nfty years.
'.si on a Ave per cent. basis this would
ed les than one-half OF one per cent.
10 ~ annual rate.
- plan o: this kind applied to a bank
e-ao.ss " 20 pick OUT the choicest loca-
tor " the city and TO put IN a build
i- much larger and moro comn,odious
'Hau Z could otherwise afford. Bankers
h'-c'N'orc have regard Il II imprudc!t
20 10 m any considerable portion OF
Their capital in tho erection OF n building
To- heir own use. but by the anortizi-
ton plan IN" bank is "uablcd 10 e-ccr
tIca a building on the hest corner In the
c'y which will bear tho banks name
S'A h" hitting cvidcgcc OF t. financial
s'-sug'h obviously, the better the loc1-
ton and 'he larger and more suhs'ar-
',al thu building occupied Ivy ih, hrni
y" better Tor the institution. II would
r~t'Ira'lv follow. then. that II would he
- ~. bt'k's Interest, TO erect a build
~ considerably larger than needed fn-
''-Eing purposes and rent the unoc-
capped space TO other tenants.
rs an example: The bank wishes IN
t.e,, a twenty story office building.
".l'h. including cos; OF ground, archl-
'f"'s -"'s and CARRYING charges during
rous'. I''i1n. Will cost one million dol
~. The hank agrees to lease the
'Gldins Tor a term Of twenty years n
$500 nor year. which Is eight ard
'aree-QUnctoT- peT cent. OF the total
tys, Of land and building, Sixty thou
sand dollars. or & per cent. oil the In
'"silnent. will be for interest. and the
remaining two y th~rec-quartcrs per
cent for amortization. II the bank con-
trres these annual payments for twenty
se1rs II Will " The building free 80
vi en"uyrorance at the end OF that
period.
As an offse' 20 this paymeu; Of
5000 p"r ruuum IS the income from
''e:t obtained from leasing nineteen
roors of ntiic" space To other tenants.
IN one illustration. which we worked
~. We found these rents TO approximate
$4,000 por year after making proper
allowances -" vacancies, taxes ana the
cost Of operating the building. On his
basis I'll" hank would own not only
~ h|I'3!ug NJ tn" expiration OF twenty
cars. hut = the same rent we're secured
Hir.ng ~" twenty yea period. Il would
"ik" an annual profit Of $500. This is
o. unusually favorable showing. how
t"'. ana could no, be counted upon in
every case.
IN IT . "A fa"' tldt net Tcltttls VI =
le' cent, are not uncommon, and with
a: sS0.u00 annual rent roll tho bank
" Aa'" purchased ne building. cost
!'g, with IN. and, ono million dollars.
~ twenty annual payments OF $1,000
''". TNIs - the difference bet wccn
-" $4,000 II agreed to pay and the
sr'"0 received from othcr tenants {;
r~'Nr"n',o having tho use OF It's bank
Ns quarters free of charge.
Il order to finance an ooeratiOn o.
Us Sorl = would be necessary t. issue
s''A bonds secured by first mortgage,
Vac am Itzation money to Se used each
,'"' N taking up a portion OF tine
'o'as. These securities should prove
Wy a''rnct,v" TO investors. rs the mort
fhs- s'""ing less each year. Ivy reason
~ '." cancellation Of j portion OF the
e''"', leave. the remaining bonds cIr-
"'y'Hdrsly 81 spngcr
I'll" question might be asked. Does
we baHf rGn any unusual risk by this
pa ani We believe the most con-
N3aiy" would answer, No. First, the
""t'"0 would be carefully selected.
a.. 'af type OF building would not he
~'e'".h"i upon without mature de-
duration A';"r these matters have
we" pa -"t upon By q committee COM
k'ieV"' 80 act FOR the bank. It should
''t y hesitation in signing a twenty
ar ''"-" on 'ne abov" terms. True.
re "hil. Inuld he Liable for the dif-
l'''r between the net rents and the
'''4a1 payments. which IL has agreed
"h " To- twenty consecutive years.
80 GWEN uuler unfavorable conditions
u'' "ogtd hc a comparatively small
n'" amt tA!s IL Offset by the fact that
' tf. E. obj I.ng llg ntltrfgYs Tpnt free.