Evening star. [volume] (Washington, D.C.) 1854-1972, 1924-10-19
Value OF Real Estate Trusts
Discussed by Financial Expert
Declared as Good Today as When Realty
Boon, Vas at Peak-TaUo Local
Banks Celebrate.

BY L. A. FLEMING.
First trusts on Washington real es-
tate downtown or in residence dis
tricts. sponsored by high-grade invest
ment houses or banks. are just as good
today as when the real estate boom
was at the peak and when labor. cost
of materials and construction were also
on the peak.
1t does not require that one shall
he a judge of realty values to secure
the benefit of safe and sane invest
ment secured by first trust on local
real estate. Any banker or the Better
Business Bureau will give the inquirer
direct and positive information on re-
quest.
But it is a matter that cannot be left
to chance. The uninitiated should not
make a selection haphazard. else they
are liable to be taken in with an in
VeStment that might turn out un-
profitable and upon which face value
might not be realized.
An unfortunate incident occurred
during the past week that would seem
to warrant the publication of this ar
ucie. IL You missed it, let it pass.
RcGm Has Lasted For Years.
For several years Washington has
enjoyed great boom in real estate,
following neriod of extraordinary de-
precision. Ii has required an enormous
amount of money TO finance the build
ing operations Of this city, TO pay
wages to the employed. buy material
and meet the constantly rising scale
of values in the industry.
Hence Washington has drawn what
is known as mortgage money from all
sections of the country, as well in
large amounts from her own savers
and investors.
Mortgages, in the District of Co
lumbia called trusts. have greatly in
creased in volume, and, offering as
they do a ready. safe market for the
investment of surplus funds, were
readily disposed of at rates varying
with the money market from the high
of Tle per cent. with an intermittent
8 per cent at the peak of construc-
ton. to the with the occasional one
half better of today and in large
amounts as low as jig per cent-this
since outside life insurance COM
parties came into the field in earnest
There Are Trusts and Trusts.
There are trusts and then there are
other trusts. There is property in
Washington that is so plastered over
with trusts that there is small chance
of the debt ever being paid.
Second trusts pay large profits
"HeH " lSeIS Iitut ny WHO
know just what they are getting
Second trusts are not for the con-
sentative investor. They are not of
the brand that is characterized as
safe
The buyer knows when he buys
the trust that there is an element of
speculation in it, unless perhaps it
is for a modest amount following a
conservative first trust on home
that is being gradually paid off and
upon which a more moderate rate of
interest is charged.
There are second trusts with 10 to
% per cent interest rate: there are
third trusts that carry a much heav-
Ter penalty in interest and there arc
even fourth trusts.
What is more, there are spectators
that buy them and they take a chance
and frequently Il desperate one, eSpe-
cially where the first trust was made
at the peak of values, that they may
not get their money out of the so
called Investment" 1t is this class
of trusts that are or are not worth
the paper they are written on. and
which the conservative investor
should religiously avoid.
With the conservative investor as
with the per cent thrift saver, abso-
lutte safety with the assurance that the
investment may be realized upon at
any desired time is ever the first con-
sidcration.
With the speculator in second and
third trusts. interest rate is the one
desiratum that counts.
The Process of Liquidation.
The matter of getting out the
trusts having been attended to, time
must elapse- before the maturity of
the obligations. The first trust Spon-
sored by the reliable banker or in
ves,ment dealer natures. is paid off
on day and date agreed upon, the
collection for the investor, settling
his claim dollar for dollar plus inter
est to date, the trustees give a re-
lease deed and the matter is closed.
If there is a second trust on the
property it's chances of being paid off
brighten perceptibly-this paid off
and the third mortgage has a look-in
to see if there are any remains while
the holder of the fourth trust has
hopes.
The reverse is not a pretty picture.
This is one of the other kind of trusts.
1t is not worth 100 cents on the
dollar.
1t is on a magnificent property, but
the first trusts were made at the
peak and a little plus in addition.
The n there is a big second and even
a third trust, and they are all tired.
There has been default of payment
Of interest and principal-the burden
was too great and the venture stag
gered and quit.
The trustees under the first trust
instruct the auctioneer to put up his
red flag, and upon Il certain day and
N al
COW bell and then and there sell the
property, the proceeds to be applied
to the first trust payment with in
terest and costs.
Second Trust Holders Must Act.
Hero is where the second trust
owner or owners must take action, if
they would protect their equity. First
proviso is whether the equity is
worth protection. If it is the prop
erty must be purchased for the full
amount of the first trust. If the sale
fails to realize enough to pay the
first trust subsequent trusts are elimi-
mated once and for all.
1t is possible but not at all prob
able that the maker of the trusts may
be made to liquidate any deficiency.
The second trust following a mod
crate amount of first trust on high
grade property is a feather bed for
the first trust, as it must be pro-
tected, and in protecting it the first
trust must be cared for.
Have Brought Ill Rtmor.
Some of the second, third and even
fourth trusts that have been soaked
"a good newspaper wordD on over
valued property, have brought the
doubt of validity upon District mort
cages; but once understood and the
further knowledge regarding the
sponsorship of these speculative
mortgages, the slur is without effect.
The Spectator who buys second,