Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-02-20
WARDMAN ISSUES
COLLAPSE IS SEEN
Hotels Management and Sc
curities Corporation Unable
to Pay March | Interest.
Continued From First Page.)

Continued From First Page.)
issues would be subject of defaults in
certain payments, forecast this morn
ing in advertisements in the New York
Times, calling for formation of bond
holders protective committees, was
given at the recent hearings of the
Senate Investigating Committee.
Analysis Is Made.
The following analysis of the Ward
man properties bond issues was made
by the committee headed by Senator
Blaine and is contained in the official
report made to the Senate:
"One OF the two issues examined by
the committee was that involving the
sale of bonds, debentures, ETC., on So
called Wardman hotel and apartment
properties in Washington, D. c. -Four
members of the Investment Bankers
Association of America-namely Halsey,
Stuart & Co., Inc; Hambleton 81 Co.,
A. B. Leach & Co, Inc, and Rogers
Caldwell & Co., Inc.-together with
william r. Compton Co.-SponSored and
participated in the public offering
throughout the country of what they
designated on their circular to be '$11,-
100000 first and refunding mortgage
Wardman Real Estate Properties, Inc.
Even the urinted description of this is
sue was deceptive, for, in reality the au-
thorized issue of bonds was $4,000, 900,
and the security back of the bond issue
was not a first mortgage on all of the
property of the issuing corporation, but
a second and possibly third mortgage as
to some OF the properties involced.
THE same properties were made the
basis Of a $2,500,000 so-called general
mortgage which was in reality third
or fourth mortgage, as to some of the
hotels and apartments listed as security
for the issues In addition, the very
questionable and doubtful equities in
the properties, encountered by the vari-
GUS mortgages mentioned, were made
the basis for two issues of so-called
gold debentures' in the amount of $4,-
900, 900. The companies issuing these
various securities also issued common
stocks to the amount of 100000 shares.
Holds Excess 100000.
1.-THE circular issued by the five in
veStment firms named, which engage in
Nationwide security distributing bus
mess, placed a valuation by So-called
independent engineers upon the prop
critics constituting the security of more
than $3l ,000,0 900. AS a matter Of fact,
this was nearly 100000 in excess of
the engineers valuation, the excess
being unaccounted for.
1T is important to note also that the
engineering firm which made the APP
praisal-Ford, Bacon & Davis-was the
same firm which made the appraisals
for the F. H. Smith Co., many Of whose
bond issues, aggregating millions of dol
lars, have resulted in huge losses to
thousands Of investors. OF interest in
this connection is the fact that another
firm Of engineers (Which later appraised
the Mayfiower Hotel property in Wash
ington), publicly advertises that it
makes eight different kinds OF appraisal,
presumably on the same property and
heads its advertisement: How Many
Values Has Your Property
The evidence of the District assessor
was to the effect that the Wardman
properties, which were the security for
the various loans described, including
S1S,500,000 Of bonds. and totaling at
least $24, 900, were assessed at their
full value, including land, buildings,
equipment, and furniture, at $l7147,525.
This was approximately $14,000,000 less
than the valuation stated in the in
veStment firms circular.
Insurance Statement Quoted.
"As indicative of the value Of assess
ment figures for establishing true worth
in connection with mortgage. bond and
security issues, this statement of the
superintendent of mortgage loans of
the Northwestern Mutual Life Insur-
ance Co zone of the larger companies
OF the country Is submitted:
In making a loan we always take
into consideration the assessed value
of the property. One of the questions
in our application blank Is, What is
the assessed value of this property for
taxation as per last assessment roll?"
We feel that 1t is important to have
this information. I should say that as
general rule loans are not made in
excess of the assessed valuation of
property
Nevertheless, the investment bank
erS named sponsored and sold widely
securities greatly In excess Of the full
value Of the properties. as shown by
assessment records, and in their cir
cular described the bond issue as rep
resenting only SIS per cent of the valu-
alton of the properties.
I'm the same circular, an estimate OF
earnings and net income of the prop
critics was included, but it included no
provision for depreciation and Federal
incom tax-nor for higher real estate
taxes based on the inflated valuation
given in the circular.
THE result Of this issue to investors
has been disastrous, for the Wardman
bonds that were sold by the sponsors of
the issue in 1928 for 500 are admitted
by the Halsey, Stuart co. to have prac-
tically no market value at this time.
They are being offered for sale by in
vestors and brokers at as low as $38
and $45 for 500 bonds.
Deficit Held S948,714.
1.-THE issuing companies own auditS
reveal that in the nine months from
January / TO September 80, 1880, the
deficit from operations was $o48, 714.09
and the accrued deficit of the combined
companies, as Of September 80, 1880,
was $3.50, 41562. Eliminating bal
ance-sheet asset of no real value, styled
"unamortized bond discount and re-
financing expense" a deficit of 4,341,-
91297 is shown by using the companies
accountant compilations. Furthermore,
more than 100000 Of the bonds
issued in 1928 are due and payable in
193l-with practically nothing accrued
by the company for that purpose.
THE accrued deflcit to September
so, 1880, Of the company issuing the
bonds was nearly 100000.
Incidentally, it Is to be noted that
one of the sponsors of the isSue-Hal-
sew, Stuart g. Co.-broadcastS over the
radio investment advice by an employe
designated as old Counsellor The
same firm advertises widely in womens
magazines, and states that 100 per cent
of the customers of Halsey. Stuart g.
Co. are women-some administering
their husbands estates-others making
their own way in the world-still 9TH
ers, careful housewives managing the
family finances"
GEORGE H. LAMAR HURT
IN MOTOR CAR ACCIDENT