Evening star., 1934-06-07
MAYFLOWER PLAN
TERMED UNFAIR"
TO BONDHOLDERS
Proposed Financing Hit by
Receiver Before Senate
Group.
PROFIT Is BEING MADE
BY HOTEL, SMITH SAYS
Motion Likely to Be Made Next
Week for Postponement
of Date of Sale.

The proposed financing and reor-
ganization of the Mayf1ower Hotel
would not be fair and equitable" to
the first bondholders, John Lewis
Smith, one of the receivers, told a
subcommittee of the Senate District
Committee today at the opening ses-
sion of its investigation of the con-
templated plan.
Smith said the receivers had dis
closed their opposition to the plan in
recent report to the District Su
preme Court after an inquiry made
at the direction of the court.
He pointed out that the hotel is
making money, that conditions have
steadily improved and that receipts
have substantially increased since
last July.
Three Payments Made.
Since the receivers took over oper-
alton of the hotel in July, 1929, Smith
said, three payments of per cent
each had been made to the frst-trust
bondholders out of the earnings. He
declared the net income from opera
tions up until December 81 last had
amounted to .$1,230, ,330.24, and that
in the first four months of this year
the estimated net income totaled
$82,6OO.
Questioning of Smith brought out
that there are 5000 bondholders un-
der the first trust of S7,5O0, 900 and
probably $500 under the second trust
of $2,400,000, making about $500 in
dividuals throughout the country who
are interested in the final outcome Of
the reorganization.
The inquiry into the reorganiza-
ton plan is being made in obedience
to the Gibson resolution, which raised
the question whether the contem-
plated change is in the interest of
the security holders. 1t is expected
to last at least week.
Smith at the outset of his testi-
mony emphasized that the investiga-
ton was not instigated or inspired
by the receivers. Then, through
series of questions propounded by FL
wood H. Seal, assistant corporation
counsel, acting as special counsel for
the subcommittee, he pictured the
difficulties encountered by the receiv-
ers in getting information from the
Bondholders' Committees and the trus-
tees. He testified that attorneys for
the BondholderS' Committees had re-
fused the receivers list of the bond
holders and that this data was not
forthcoming until the court ordered
the list so that an interest payment
could be made on the bonds
Asks How Sum Was Reached.
Seal asked Smith how the court
arrived at the minimum bid price OF
S2,80O,O 900 for the forthcoming sale
and whether any appraisal had been
made by disinterested appraisers.
Smith said various figures had been
suggested in discussions Of the ques-
ton before the limitation finally was
fixed. He said also that no indie
pendent appraisal had been made, but
that that question was discussed in
court yesterday and he understood
an order probably would be signed
in court today naming appraisers.
1t was also brought out in the testl-
mony that a motion probably would
be made next week in connection
with the court proceedings to post
pone the date for the sale, which
is set for June 10.
Asked by Seal if the receivers had
worked out any plan that would be
fair to all, Smith replied they had
drawn up a plan and submitted a
copy of it to the subcommittee for
study.
Excused to Get Records.
Harry Wardman, prominent builder,
and John L. Weaver, who has long
been identified with Washington real
estate circles, were called as witnesses,
but were excused to procure records
desired by the subcommittee. They
were notified to return when the in
vestigation is resumed tomorrow at
1920 am.
Wardman appraised the hotel prop
erty in 1928, when bonds were issued
on the building. Weaver helped make
the land appraisal at that time.
The total appraisal was placed at
S12 500 900.
William P. Richards, District tax
assessor, the first witness, reviewed
the assessments for tax purposes on
the hotel property, showing that the
valuation of $4,732, ,120 in 1892 had
been reduced to S4,284,090 in 1934-35.
The reduction was made, he testified,
as the result of an appeal from the
assessment by the receivers. He said
1t was based partly on depreciation
and partly on lowered building costs.
Offers List of Materials.
Richards also submitted as an ex-
hibit list of the materials used in
construction of the hotel building
exclusive of the furnishings, which,
according to the contractors figures,
cost net of $3,763,585. The fur
nishings, according to the bondholders'
circulars, it was brought out, are
valued in excess of $1,500000.
Richards was directed by the sub
committee to submit later for the rec
ord the assessed value of the personal
property of the hotei Records were
introduced, however, showing that his
appraisal in 1881 was $500,000. He
explained that the personal property
valuation is based on the sworn state
ment Of hotel officials and not on any
personal investigation made by his
Office.
Senator Reynolds, Democrat, of
North Carolina indicated by his brief
questioning of the witnesses that he
is anxious to find out the basis for
the S12,600,000 valuation placed on
the hotel in 1923, when the bonds
were issued on the building.