Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-26

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devices and increased facilities fl
increased numbers of investment
in real estate; longer terms for req
interest in real estate securities.
Wells Writes Article.
Mr.. Wells article, reprinted, with per-
mission of the Journal, follows:
Times have changed, and with them
real estate financing. Probably more de-
velopmentS have taken place in the
financing of large real estate projects
during the past two or three years than
in any previous period of real estate
history. New methods are being used;
new varieties of securities are being
offered; new types of real estate opera
tions are being financed. We still have
the mortgage bond, and we will always
have it, no doubt, but at present 1t is a
wallflower at the dance of the dollars,
so to speak. Where, yesterday, the in
vesting public was satisfied with per
cent and first "look-in" on the as
sets, today that same public is demand
ing 6 per cent and some sort of look
in" on the profits. Formerly real es-
tate issue of a million dollars was some
thing to talk about, now the lowly mil
lion is but piker sum; for the figures
are being revised upward, and appar-
emily the sky is the limit.
Changes result from causes, and so
1t is that several causes have con-
tributed to the present altered condi-
tons of the real estate money market.
OF these causes, two are outstanding;
one Of them fundamental, the other in
cidental.
1t is evident, first of all, that real es-
tate itself is stepping out with big
business. The aggressive realtor of to-
dau &c faIkjnn millions instead nf
thousands; his business is becoming
national as well as local: as a salesman
of the worlds most stable commodity
he Is evolving from a side street shop
keeper into a Main street merchant.
Consolidation, large-scale operation,
group ownership, concentrated and
scientific management, and other big
proved their worth in other fields are
being adopted by real estate operators
the country over.
On Larger Scale.
Not only are big business methods be-
ing introduced into the real estate bust
ness but they have come because there
was need for them. For some time
there has been a decided trend toward
transactions of greater and greater size.
Where previously the realtort might
struggle to promote the erection of a
single building today he may engineer
the purchase of an entire city block and
cover it with improvements of colossal
size.
Many influences have had their part
In effecting this change; but to cite a
few of them will serve to illustrate the
point. For example: Our great ma
tional prosperity with its resultant de-
mand for improved housing and office
accommod ations; the tendency toward
the apartment house and the apartment
hotel as living quarters for the typical
American family; the increase in size of
apartment house and business building
units; the great growth of urban prop
erty values; a marked advance In the
design and construction of modern
building; the application of modern
financing methods to real estate opera
tons; the rapid spread of the co-opera-
tive plan of ownership; the passing of
the individual owner Of properties of
large value, to be succeeded by the
syndicate, the real estate corporation
and, more recently, by the large invest
ment company; the phenomenal rise OF
the chain store scheme of merchan-
dising and the adoption of this method
of operation by hotels, theaters, garages
and other businesses whose activities
extend over large areas, and who own
or lease their own buildings or locations;
and finally the application Of the in
vestment trust idea to the acquisition
ownership and operation of large groups
Of properties. All Of these factors have
had their place in putting real estate
In step with big business.
Different in Type.
With the coming of real estate opera
lions of unprecedented size there came
also a need for financing, greater in
amount and, in many instances, differ
ent in type. Where heretofore an oper-
alton might have been financed above
the first mortgage by funds received
from the proceeds of a conservative
second mortgage and those put in by
the owner or a syndicate, in more re-
cent times, when the transaction called
for an investment running into the mil
lions, the problem was not so simple.
Principals either individuals or groups,
who could provide funds in seven fig
ures, were scarce indeed. Nor was 1t
easy to place first mortgage financing
in the large amounts required. OBJ
viously the real estate financing ma
chinery of former days had become in
adequate to meet the new situation at
least so far as large projects were con-
cerned.
This problem was solved, largely. as
have been similar problems in other
lines of business, by appealing to the
investment banker and through him to
the general public. Smaller issues Of
real estate securities had never been Of
interest to the investment banking
houses because such issues could not be
handled with profit. However, wher
the call came for millions of dollars
things were different That was Ian
guage which the bankers understood
and to which they are willing to listen