REAL ESTATE
My first purchase of real estate was No. 32 West Thirty-fifth Street, a
twenty-two-foot, white marble, high-stoop building. I bought it for the
modest sum of $15,000 and resold it at an advance of $500, and thought I
was doing well. To-day it is worth at least $110,000. This, however, was
not my first experience with real estate, for that was in 1872 when, at
the request of my preceptor, Mr. Ferdinand Kurzman, I undertook for an
extra compensation of $5 a month to collect for him the rents of No. 218
Chrystie Street.
The tenants of this building in 1872 were Irish and Germans, and one of
the stores was occupied as a saloon by an Irishman named Ryan who
catered to the worst element of the neighbourhood. Kurzman, failing to
get rid of him in a peaceful way, and knowing that there was a political
feud between him and Anthony Hartman, the odd though popular Justice of
the District Court, waited for the first of May, when only a
three-hours’ dispossess notice was required. Circumstances favoured the
plan because on that day the Thomas Ryan Association were giving a
picnic. So the notice was served by nailing it on the door at twelve
o’clock. Judge Hartman opened court at three o’clock, called the cases
of _Kurzman_ vs. _Ryan_, took Ryan’s default, signed the dispossess
warrant, and adjourned the court, compelling all other litigants to wait
for their justice until the next day. Instead of the usual one marshal,
all those attached to the court, with their assistants, were hurried to
No. 218 Chrystie Street, and within two hours had removed everything to
the sidewalk.
By that time word had reached Ryan, and he and some of his henchmen
returned. They were thoroughly aroused but quite helpless. As there was
no court in session, and the marshals were in possession of the
premises, Kurzman was rid of Ryan for good and all. This was the first
exhibition I ever saw of how justice might be travestied.
The next day Ryan’s attorneys appeared before Hartman and attempted to
have the proceedings reopened, and upon Hartman’s refusal to do so,
attacked him bitterly. The Judge said that if the learned counsel would
not at once stop his impudent remarks, the court would forget its
dignity long enough to leave the bench and “punch him in the jaw.”
My next experience brought me in contact with even a worse element.
Kurzman had foreclosed a second mortgage on some houses on West
Thirty-ninth Street between Tenth and Eleventh avenues. They were part
of the block that was called “Hell’s Kitchen.” Many of the tenants owned
only a mattress and a few chairs, and no kitchen utensils of any kind,
and frequently paid their rents in instalments of less than one dollar.
Twice I saw women carried out of the buildings the worse for the
“exciting arguments” they had indulged in with some of their visitors.
It would not have paid us to dispossess these people, as the new ones
would have been no better. We collected the rents for a few months
longer until the first mortgages were foreclosed.
This condition was very general throughout the City of New York. The
boom days of real estate had disappeared, and with them, the optimistic
speculators. Real estate was unsalable, and those who had received
mortgages in payment of some of their capital and all their profits were
confronted with the choice of either abandoning their mortgages or
foreclosing them and again assuming control of their property. The
conferences between the delinquent owners and the mortgagees to adjust
these matters reminded one as much of funerals as the joyous meetings in
the wine cellars had of weddings. These middle-class investors whom I
met in ’72 and ’73 were completely wiped out and never came back. Quite
the contrary was the case with most of those intrepid builders and
operators like John D. Crimmins and Terrence Farley, who forgot their
losses and went at it again with fresh vigour and new courage as soon as
the liquidation had ended. In 1879, when specie payment had been
resumed, the superintendents of both the insurance and bank departments
urged institutions under their supervision to market their real estate
as soon as possible. Their efforts and those of other recent plaintiffs
to dispose of their holdings started a new active period. Real estate
again became fashionable, and the plucky operators and builders who had
survived the drastic punishment they had received were soon reinforced
by a new set of men, of whom I was one.
In 1880, I turned my attention to Harlem where nearly all the brownstone
and brick houses that had been built in the seventies were in the hands
of mortgagees, and where the owners of the old frame houses were
thoroughly discouraged and could see little hope in the future. Nearly
all of Harlem was for sale. I bought plots of three to five adjoining
houses at a time, and quickly resold them at small profits. This
activity stopped when President Garfield was shot. The suspense during
his illness caused a complete cessation, so I, too, rested until
October, 1885. I was then worth only $27,000, and as a large part of
that was represented by my interest in the Celluloid Piano Key Company,
I had but little working capital.
My brother-in-law, William J. Ehrich, agreed to operate with me in real
estate, he to contribute $40,000 capital and I to do the work. All
profits, after paying him interest, were to be divided equally.
At that time my mother lived on One Hundred and Twenty-sixth Street in a
house I had purchased, a 17-foot brown-stone house with a pleasant yard
which she personally transformed into a delightful little garden. In my
frequent visits there I became impressed with the prospective importance
of One Hundred and Twenty-fifth Street. It was the first broad street
north of Forty-second that ran from river to river, and I foresaw its
future value, particularly of the block between Seventh and Eighth
avenues. It seemed to me like the neck of a funnel into which the entire
neighbouring population was daily poured to reach the Elevated station
at One Hundred and Twenty-fifth Street and Eighth Avenue.
Ehrich and I concluded to secure some property on this block. The first
that we obtained was the lease of seven lots for which, at the
beginning, we paid the annual rental of $4,000. We still own this
leasehold, and the gross rental now is $44,500. We subsequently
purchased the adjoining plot of five lots, improved the same, and were
delighted when we were enabled to sell it to the Knickerbocker Real
Estate Company among whose stockholders were Solomon Loeb, of Kuhn, Loeb
& Company; Henry O. Havemeyer, John D. Crimmins, and John E. Parsons, at
a price which netted us a profit of $100,000. This was in 1899.
Subsequently, I repurchased this plot jointly with my partners, Lachman
& Goldsmith, for $250,000, and within two years thereafter sold it to
Mr. Louis M. Blumstein for $425,000. This was the most profitable, but
not the only transaction we had on this street. With various associates
I owned, at one time or another, one half of the property on the south
side of that block, so that I made good use of my early judgment as to
its future value.
Our operations on One Hundred and Twenty-fifth Street were not confined
to that block alone. We had also purchased various plots between Fifth
and Sixth avenues and, with a friend, I had collected a plot of eight
lots between Lexington and Fourth avenues. This made Oscar Hammerstein
one of my customers.
One day the optimistic Oscar came into my office with his serious,
flat-footed walk, his French silk hat on his head, and his eternal cigar
between his fingers. He had just completed the Harlem Opera House on
West One Hundred and Twenty-fifth Street, and he told me that, for his
success there, it was essential to have also a theatre on the East Side,
and he negotiated for the eight lots that we had collected on One
Hundred and Twenty-fifth Street near Park Avenue. We spent several hours
arranging the details of the lease of our property, with privilege to
buy, which was what he wanted. He argued me into giving it to him on a 4
per cent. basis while the building was being constructed. When he was
all through, I said:
“Do not think that you have deceived me as to your real aim. You want to
secure this property and pay down as little as possible until your
building is completed! All of us who own property on One Hundred and
Twenty-fifth Street between Seventh and Eighth avenues greatly
appreciate the fine theatre you put there, and the consequent increase
in the value of our property, and I am therefore willing to help you
make this enterprise a success. I will at once give you a deed, and as
there is no broker in the transaction, you need only pay the equivalent
of six months’ rent on account of the purchase price.”
Hammerstein gratefully accepted the offer and, subsequently, told me how
he financed that entire operation without any capital. He struck a
sand-pit and saved all costs of excavation, besides realizing over
$30,000 for the sand. That furnished him nearly all the cash for the
building.
A little later Hammerstein got into difficulties about an office
building next to the Harlem Opera House. He wanted to borrow $25,000 on
a second mortgage. He practically put a pistol to my head, and said:
“You folks must lend me this money, or I can’t finish the building--and
that will force me into bankruptcy.”
I looked at him and saw not the optimistic Oscar, but the harried
Hammerstein. He went on:
“You don’t know what that will mean. If I go into bankruptcy, the Bank
of Harlem will also have to go. I owe them over $50,000 and they have
agreed that, if I can finish the building, they will buy it from me,
giving me back my notes in part payment.”
“But that bank,” I protested, “has only $100,000 capital! How could it
lend you $50,000?”
“One day,” he said, “as I was seated in my little office underneath the
steps of the Harlem Opera House, the president of the Bank broke in, and
leaning over my shoulder, handed me a blank note, and asked me, for
God’s sake, to make it out to the order of the Bank for $10,000. ‘Don’t
ask any questions,’ he whispered, ‘but just do what I want, and do it
quick.’ I complied with his request, I didn’t stop to put on my hat and
coat, but followed him to the Bank; and just as I expected, there were
the bank-examiners!”
He paused in his narrative to give me one of those knowing, piercing
looks of his. This was still another Hammerstein: he was the
accomplished actor awaiting applause for securing such an extensive and
undeserved line of credit from so unexpected a source.
“Does that,” he asked, “explain to you how I could pull his leg?”
The impresario did not then go into bankruptcy. A few of us combined and
lent him the money. My activities in Harlem also included the purchase
of two solid blocks of lots.
In 1887 Ehrich and I bought from Oswald Ottendorfer the entire block
bounded by Lenox and Mount Morris avenues and One Hundred and Twentieth
and One Hundred and Twenty-first streets. I induced the Ottendorfers to
split the transaction and content themselves with our buying the Lenox
Avenue front outright and their giving us an option on the Mount Morris
front. This option was sold for $10,000 profit, to Walter and Frank
Kilpatrick, and our total profits, which we divided in May, 1887, were
$43,424.10. I always remembered the numbers because of the sequence, 43,
42, 41.
Immediately after we had sold the Ottendorfer block we purchased the
block to the north, also for $325,000. In this purchase the Kilpatricks
joined us. I had a peculiar experience when it came to drawing the
contracts. As the Ottendorfers had agreed to take back separate
mortgages on every four lots, I wanted the Astors, owners of this block,
to do the same. Mr. Southmayd, the partner of William M. Evarts and
Joseph H. Choate, attorneys for the Astors, refused to do so, and
insisted that we give him one mortgage for the entire $240,000 which
they had agreed they would allow to remain on the property. All my
pleadings were in vain. He even refused to take back four mortgages on
eight lots each, saying that he could not tell which was the most
valuable, and we might retain one or two of the plots and forfeit our
equities on the rest.
Mr. Southmayd told me that just prior to the Panic of 1857, when farms
of 160 acres in Brooklyn were being sold at very inflated prices, an old
German truck-farmer was asked what he wanted for his 160 acres. He
demanded $50,000, the prevailing price at that time; $35,000 cash and a
$15,000 mortgage. When they argued with him that he had reversed the
order of things, Hans still adhered to his terms, as he claimed that the
property was not worth over $15,000, and when asked why he then insisted
on $50,000, he answered, “because you paid that amount to my neighbour
Peter for the same size farm.” Southmayd sneeringly added that after the
Panic of 1857 Hans got his property back for his mortgage.
I would not submit to being balked by Southmayd. I made up my mind to
talk to the famous John Jacob Astor himself.
I had never met him, but he had often been pointed out to me, as,
shortly before 9 o’clock, he walked with his son, Waldorf, down Fifth
Avenue, from their home to their office in Twenty-fifth Street. Astor
was a portly figure with impressive side-whiskers. I watched for them
and followed them to their office and asked for an interview. My plain
statement of facts made no apparent impression on them. I tried again: I
told Southmayd’s story of Hans: a smile broke the severity of the
elder’s face.
“Mr. Astor,” I concluded, “you must admit that it’s unfair to your
property to compare the Harlem of to-day with the Brooklyn of 1856.”
“You’re right,” said Astor. “You make me a proposition of what relative
values you put on the various plots, and what will be the amounts of the
separate mortgages, and I will have it checked up.” I submitted my
figures and they were accepted without any change. The mortgages were
paid long before they were due, as all the property was promptly
improved. I believe this was the first time that the Astors broke away
from their policy of not selling any of their holdings.
While these activities were going on in Harlem, a great many builders
had erected rows and rows of private houses on the West Side,
principally between Central Park West and Amsterdam Avenue, so as to be
adjacent to the Elevated roads. In 1887 and 1888 there was a
considerable slump, and over three hundred new private houses were
unsold and unoccupied. Everything looked very gloomy. All of us who were
interested in the West Side were terrified when an announcement came
that there would be an unrestricted auction of the Joshua Jones Estate
on Seventy-fourth and Seventy-fifth streets from Central Park West to
within a few hundred feet of Amsterdam Avenue.
Ehrich and I attended the auction, and when the first lot on
Seventy-fourth Street was put up with the privilege of the balance of
the block, we astonished the auctioneer and all present by taking all
twenty-four lots.
That afternoon Ehrich and I went up to look at our purchase. As we
walked over the lots a couple of men shouted at us to get off the
property. We asked them why, and they said: “Don’t you see our traps? We
are catching birds here.”
There is not much bird-trapping in that neighbourhood to-day!
Success breeds enterprise. When we had disposed of these various plots
at a good profit, I was ambitious to undertake still larger
transactions. The original Rapid Transit Commission was then laying out
the routes of the first subway, and I, in search of another One Hundred
and Twenty-fifth Street, began to prospect for the district in which the
Commission would be likely to locate a northerly spur, concluding that
if Washington Heights were made accessible, One Hundred and Eighty-first
Street would become the important thoroughfare of that neighbourhood.
There were four hundred lots owned by Levi P. Morton, then
Vice-President of the United States, and George Bliss, of Morton, Bliss
& Company, for which I had practically concluded my negotiations in
September, 1890, when the Old World was shocked by the failure of Baring
Brothers, the largest banking house of England. All negotiations were
stopped. But, in February, 1891, about eighty lots located in this
vicinity were successfully disposed of at auction. Peter F. Meyer, who
conducted that sale, assured me that less than one half of the bidders
had secured lots.
On the strength of this success, I asked L. J. Phillips to ascertain
whether, owing to the financial stress of the times, the owners, Morton
and Bliss, would take $900,000 for their property, for which they had
formerly asked $1,000,000.
Phillips’s report was brief: “Nothing less than a million.”
This was what I really expected, and my directions were briefer: “Go
close it!”
On March 26th I signed the contract. I paid $50,000 down and agreed to
pay $300,000 more on May 27th. I then interested about fifteen people in
the syndicate, many of whom were very prominent in real estate. We were
granted special facilities to open One Hundred and Eighty-second Street,
and had all the work done before the auction.
This arrangement gave us sixteen complete blocks with sixty-four
corners, a most unusual percentage.
There were a number of fortuitous circumstances which helped to make for
success. James Gordon Bennett having large possessions in that
neighbourhood, directed that our sale receive generous attention in the
_Herald_. There had been a secession of some of the auctioneers from the
Real Estate Exchange, which then occupied its own building at No. 65
Liberty Street. Their manager called and said that their Board of
Directors were ready to do almost anything that I would ask to secure
the sale. They allowed me to display in the salesroom during all of May
a sign 60 feet wide and 20 feet in height, and they also agreed that
they would permit no other sale on May 26th.
We had numerous conferences, and none of my associates agreed with me
that it was possible to sell so many lots at one session, but I was
absolutely firm and insisted that it be tried. I conceded that I would
stop the auction if I found that the purchasers had been exhausted, or
that the lots were being sold at a loss. Thousands of people visited the
property on the preceding Saturdays and Sundays. We could have sold the
property on the 26th of May without having made our final payment, and
could have used the proceeds of the sale for that purpose, but to avoid
any possible question as to whether we had taken title or not, we closed
the title on the day before the sale. As we were about leaving Morton,
Bliss & Company’s offices, both Bliss and Morton expressed the wish that
we might have a great success the next day, and the genial
Vice-President of the United States added: “If there is anything I can
do, please call upon me.” In response, I asked him whether he would come
over to the auction-room and if necessary, to convince the public of our
authority to sell the property, whether he would make a statement from
the auctioneer’s stand. He consented to do so and waited at his office
until I notified him that there was no need of his remaining any longer.
When the auction started, the entire floor as well as the auction stands
and gallery were crowded to capacity. The bidding was very lively, and
when some of the One Hundred and Eighty-first Street corner lots sold
for over $10,000, there was considerable applause.
The auction lasted until seven o’clock, and every one of the 411 lots
was sold. Ex-Register John Reilly had paid the highest prices: he bought
the entire front on the west side of St. Nicholas Avenue from One
Hundred and Eightieth to One Hundred and Eighty-first streets, and he
afterward confided to me that he had succeeded where we failed in
finding out that the Subway was to go through St. Nicholas Avenue, and
that there was to be a station at One Hundred and Eighty-first Street.
The corners of One Hundred and Eighty-first Street and St. Nicholas
Avenue are to-day the most valuable on Washington Heights.
Our syndicate was well satisfied with the result, as we divided a profit
of $480,000 amongst the men who had invested $300,000. They showed their
appreciation of my work by presenting me with a magnificent silver
service, which was greatly admired by my Turkish visitors in
Constantinople.
I was quite carried away with my success, and my enthusiasm made me an
easy prey to the temptation of participating in a still larger
scheme--the development of the Town of Bridgeport, Alabama. A few years
prior to 1891 there had been a great boom in Birmingham and Anniston, so
that I was easily persuaded by the firm that had been associated with me
in the purchase of the Astor Block to go in with them to develop
Bridgeport.
All of us in the North felt that the South was “coming back” and
Bridgeport was near coal and iron fields and had good water power. We
started development, stove- and iron-pipe companies, a hotel, and a bank.
We believed, with energetic New Yorkers back of it, this little town on
the Tennessee River could be made a great manufacturing centre; we all
forgot that it was very far from Broadway. Before I knew it, I had sunk
more than my Washington Heights profit, and I am still paying taxes on
some of the land that I bought at that time.
The loss of that money was a wholesome lesson, and I resolved to stick
to New York. I broke this resolve on only one other occasion, and that
was my venture into the Bamberger-Delaware gold mine: we took out plenty
of gold--something like $600,000 a year, but it cost us more than that
to do so. That investment also proved a total loss.
In the winter of 1891 we began an operation which was to result in
winning the record for rapid construction up to that date. Our tenants
in the Hoagland property at Fifteenth Street and Sixth Avenue failed. We
concluded to tear down the old buildings and erect a new one. We had
been negotiating unsuccessfully with Baumann, the furniture dealer, so
we planned with our architect to put up a four-story building. I was in
the architect’s office the latter part of January, when in walked Mr.
Baumann and told me that if I would guarantee to finish the building by
April 30th, he would pay the price I asked.
I consulted my architect, Albert Buchman.
“It’s impossible,” he declared, “four and a half months--June 15th is
the earliest date conceivable.”
“Even if we use double shifts?”
“Even if we use double shifts.”
“Well,” I said, “I’m going to chance it.”
Buchman’s allotment for the excavation was fifteen days. I sent for
Patrick Norton, who had done some excavating work for me in Harlem.
“Pat,” I asked, after I had sketched the case, “is there any objection
to working twenty-four hours a day?”
“That depends,” said he.
“Well, if you went at it on that basis, couldn’t you finish this job in
seven instead of fifteen days? I’ll pay for the light, and I’ll give you
25 per cent. extra.”
Norton belonged to the type of bluff, enterprising contractors. The
novelty appealed to him, and he accepted it on the spot and completed
the job on time.
Everything else went with similar speed. We were told that it would take
some time to get the iron posts required for the cellar; I showed our
plans to a man from Jackson & Company, and asked him whether, for an
extra consideration, he could have the posts required for the job
finished within a week. Within three days he made his deliveries. We
changed our specifications and substituted wooden ceilings for plaster.
We had the building finished and the elevators running on April 27th.
The building was a four-story structure with an iron front covering five
full lots, and we erected it for a trifle under $110,000.
I had another but less satisfactory experience with Pat Norton:
In the Winter of ’97 I bought from Collis P. Huntington a tract of land
running from One Hundred and Thirty-eighth to One Hundred and
Forty-first streets and from St. Ann Avenue eastward. The Title Company
discovered that Huntington did not own as large an area as was described
in the contract, so I called on him to ask for a reduction. It was a
memorable sight to behold this great old gentlemen, 6 feet 3 inches in
height, over eighty years of age, with as keen an intellect as a man of
thirty, trying to fathom my motives and playing with me as a cat plays
with a mouse. He leaned forward to get close to me, adjusting his little
skull cap a bit, and said:
“Suppose I make you no concession at all! Are you going to throw up that
contract, or take the property?”
“I will take the property because I expect to make a profit,” I said,
“but I am going to rely on you to do the fair thing by me.”
He sat back in his chair and told me his experiences with Trenor W.
Park, who wanted to buy a railroad from him. A dispute arose about it,
which resulted in a law-suit. Afterwards, Park wanted to settle and buy
him out. Huntington fixed the price, and as Park hesitated, he told him
that for every day he delayed in accepting the offer he would add
$100,000 to his price, and as seven days had expired since his first
offer, the price was $700,000 more that day. Park agreed to that figure
before he left the room.
“My experience,” said Huntington, “is that no man benefits by law-suits,
but that no man can succeed if he is afraid of them. Now, what do you
really think would be the fair thing for me to do in your case?”
I mentioned a sum, and he said:
“Strange to say, that is the figure I had in my mind.” He dictated a
letter then and there, agreeing to the reduction.
We were anxious to dispose of the Huntington property at auction, and
hurriedly prepared it. There was a stone fence running diagonally over
the southerly part of the property, and I thought it would improve the
appearance of this place to have the stones removed, and as Norton was
putting through the streets and laying the sidewalks, I made a contract
to have him do so for $800. The next morning I was impelled to visit the
Huntington property. I was amazed to find 150 Italians working shoulder
to shoulder, digging a trench alongside the stone wall, and dumping the
stones into it. I stopped them and sent for Norton. When he came,
instead of being ready to apologize, he wore a broad grin and said that
he never expected me to come there, as I always came alternate days: by
the second day no trace of that trench would have been left--what
difference would it make to me, as long as it had disappeared, where it
had gone?
We advertised an auction of this property for April 5, 1898. Because of
the expectation of a war with Spain, a number of people asked me to
abandon the sale. I agreed with their arguments that the sale would not
succeed, but I wanted to see if my analysis of the psychology of
prospective buyers was correct, which was, that some persons expecting
big bargains would come to the sale and would buy. So I concluded to put
up a few of the least valuable lots--those that had considerably more
rock above the surface--and then try some of the St. Ann Avenue fronts.
Just as I expected, the rock lots brought a very low price, but really
all they were worth, and were purchased by one of the shrewdest dealers
in New York. We stopped the sale after thirty were sold.
In the winter of 1894 great excitement was caused among the real estate
men by mysterious efforts to secure the block on the east side of Sixth
Avenue between Eighteenth and Nineteenth streets. I was keenly
interested because if the east side of Sixth Avenue was to be developed
it would injure our Hoagland property, especially if it were a retail
concern, which would throw the travel from Macy’s on the east side. I,
therefore, called on my old friend William R. Rose, who was acting as
attorney in the matter. On my assuring him that I wished to benefit by
my information without interfering with his scheme, he told me that the
site was being collected for a retail drygoods store with a main
entrance on Sixth Avenue, and it finally turned out to be Siegel-Cooper
& Company. I immediately negotiated for the properties on the east side
of Sixth Avenue adjoining this block and secured for Lachman, Morgenthau
& Goldsmith from William Waldorf Astor the Nineteenth Street corner now
occupied by the Alexander Building, and for myself alone the entire
block from Seventeenth to Eighteenth street to a depth of 180 feet, from
some of the descendants of John Jacob Astor. Simultaneously with the
completion
[Illustration: Mr. Morgenthau playfully refers to this picture as the
Morgenthau dynasty]
of the Siegel-Cooper Company, I modernized the block front from
Seventeenth to Eighteenth Street, and we erected a new building on the
corner of Nineteenth Street, and sold it to Andrew Alexander.
One evening Alwyn Ball, Jr., told me that Henry Parish wanted to sell
his house at the corner of Fifth Avenue and Nineteenth Street. I
suggested that I would buy the property if Mr. Parish would take in part
payment the second mortgage of $100,000 that Alexander had given us on
his corner. The Astor Estate held the first mortgage of $100,000. Ball
looked aghast.
“Why,” he said, “that’s a preposterous proposition! The idea of offering
a second mortgage on a leasehold for the fee of a first-class Fifth
Avenue corner, and to make it to so conservative a man as Mr. Parish! He
has never even had a telephone in the offices of the New York Life
Insurance & Trust Company, of which he is president! You must want me to
be kicked downstairs.”
“You’re absolutely mistaken,” I answered. “Mr. Parish is constantly
buying mercantile notes for his Trust Company, and will know that this
personal bond of Andrew Alexander’s, guaranteed by me, is as good as any
note that he has in his wallet. His office is on the ground floor--you
needn’t be afraid of being kicked downstairs.”
Ball presented the offer and Parish accepted it. The mortgage was paid
on its due date: I made a small profit on the Parish house and disposed
of an almost unmarketable mortgage without any loss; Ball made a good
commission, and so all were happy.
Shortly after I had another deal with William Waldorf Astor. It involved
a part of the Semler farm on the east side from Fourth to Tenth streets.
My negotiations with Charles A. Peabody, now president of the Mutual
Life Insurance Company of New York, were drawn out for over six months,
as his letters had to follow Astor all over Europe. After we had come
to a definite arrangement, war was declared with Spain. Peabody
surprised me one day when he came unannounced to my office to ask me
whether I was still willing to make the purchase. I told him that I was
convinced that the war would not affect the thirty Germans who were
occupying these houses, and to whom I expected to sell the fees; and
that I would be more pleased if he would sell me one hundred houses
instead of forty. We entered into a contract to purchase forty lots on
which the leases expired within a year. There was tremendous excitement
among the tenants; protest meetings were called and cables sent to
Astor. This brought me another visit from Mr. Peabody.
“Now, Morgenthau,” he said after sketching his predicament, “will you
try to help us out?”
“I am perfectly willing,” I said, “to take other property of Mr.
Astor’s, and let him deal direct with the objecting tenants, but I want
a corner plot for a corner plot, and an inside avenue plot for an inside
avenue plot and as many inside street lots as I was to have had.
Although you have no properties on which the leases terminate the same
time as these for which I am under contract, I am willing to buy them on
the same basis,”--which was multiplying the annual ground rent by
twenty.
Peabody said that this was eminently fair; he would try and show his
appreciation, which he did, by selling us forty-four plots instead of
forty. We consummated the transaction on July 18, 1898. The deed that
was given was the first in which William Waldorf Astor failed to
describe himself as “of the City of New York.” It was a very
satisfactory transaction, as all but three of the tenants availed
themselves of the privilege we gave them to buy the property from us at
a reasonable profit.
The year 1898 marked the twentieth anniversary of Lachman, Morgenthau &
Goldsmith. As I was leaving for my summer vacation, my partners urged
me to plan out how we could celebrate that event. While I was fishing in
the Thousand Islands, the infrequency of the bites of the black bass
left me ample time for reflection, and I concluded that instead of a
celebration, it would be a separation. I had felt so inclined for many
years, but the delightful association with my partners, the extreme
consideration they constantly showed me, the deep affection we felt for
one another, had caused me to delay, and their persuasion not to do so
had prevented my taking the final step. Here during these uninterrupted
hours on the St. Lawrence, I was able to look at myself objectively and
from both a retrospective and prospective point of view.
The success of my real estate operations had won me away from the
exclusive devotion to the law which is so essential to rise in that
profession. In figuring the profits that had been made by the various
real estate syndicates that I had managed since 1891, I was surprised at
the total, and realizing that at no one time had I had the use of more
than $500,000 of my friends’ and my own money, I concluded that if I had
had a company with that amount of capital, and could show the profits
that had been made as surplus, the good will of such a company would be
very valuable and would be reflected in the selling price of the stock.
So why not induce some leading financiers to join me in the formation of
a real estate trust company, which would do for real estate what the
banking institutions have done for the railroads and industrials?
I wrote my partners of my decision, and told them that I would withdraw
from the firm on January 1, 1899.
Among others with whom I discussed my scheme were Frederick Southack and
Alwyn Ball, Jr., who had surprised me by informing me that they had had
a similar thought and had already secured from the New York Legislature
a special charter granting the privileges that would fit my scheme.
They asked me to join them and accept the presidency of this company. I
accepted conditionally, telling them, however, that I would aim very
high as to my associates and would insist that as chairman of the
executive committee there be secured either the leading banker, J. P.
Morgan, or the leading bank president, James Stillman, or the leading
trust company president, F. P. Olcott.
Southack and James H. Post, who was a director in the National City
Bank, presented the scheme to Mr. Stillman, who kept it under advisement
for several weeks, but finally declined because he had been advised that
some of our operations might be too speculative. In the meantime,
Southack and Ball had, in addition to Mr. Post, interested Henry O.
Havemeyer, John D. Crimmins, and several others. They then presented the
matter to Mr. F. P. Olcott, president of the Central Trust Company, who
was a trustee of the estate of Southack’s father. Olcott listened to the
outlining of the plans of such a company, and when they proposed me as
president and told him of the great profits I had made in real estate,
he said that when it came to any proposition involving real estate, he
was entirely guided by Hugh J. Grant, whose office adjoined his.
Grant had, while Mayor of New York, appointed Olcott to the first Rapid
Transit Commission, and when he was appointed receiver of the St.
Nicholas Bank, Grant called on Olcott and availed himself of an offer
theretofore made him by Olcott to be of service to him. He told Olcott
that he was very anxious to make a record as receiver, and asked an
immediate loan of as much as the assets of the bank justified to enable
him to declare promptly a substantial dividend to the depositors. Olcott
not only did this, but was so pleased with the manner in which Grant
handled the receivership, that he urged him to abandon his railway
advertising business. He did so, and took offices next to Olcott and
above those of Brady, and became the third member of that famous
combination--Brady, the creator of the schemes; Olcott, the financier;
and Grant, the expert in political and municipal affairs.
He called Grant into the office. Grant listened most attentively to the
proposition, and then said:
“Morgenthau has been too successful to be willing to work for a salary
and accept the presidency of a company.”
As Southack and Ball insisted that he was mistaken, Grant, with his
usual directness, came right over to see me. That visit was a very
memorable one for me. We carefully canvassed the entire proposition and
concluded then and there that not only was I to take the presidency, but
that Grant should take the vice-presidency, and become a visible figure
in finance and cease being known as an unattached associate of Olcott
and Brady.
Grant’s greatest faculty was in being able to “sniff” success, and
through his tremendous amiability--which had made him so popular a man
in New York--he was able to appeal to successful men, who heartily
welcomed his coöperation on equal terms with themselves in their various
enterprises. He also had watched me during my career, and realized the
wisdom of a combination with me from his point of view; while I realized
that a close coöperation--a supplementing of one another--would benefit
us both, so we fell into each other’s arms. Grant and I then and there
agreed to join forces. He agreed to take 1,000 shares for himself, 1,000
shares for Mr. Olcott, and within an hour telephoned me to note also
Anthony N. Brady’s subscription for 1,000 shares. That afternoon when
Southack and Ball came in and heard of the subscriptions, they each
insisted upon the right to subscribe for 1,000 shares.
This disposed of one half of the stock. I wanted one half of the
remaining 5,000 shares, but unfortunately for me, the others insisted
that I should content myself with 1,000, and that the other 4,000 should
be distributed amongst the rest of the directors, and amongst lawyers
and real estate operators and brokers, whose interests would produce
business for the company. There was a tremendous scramble for the stock,
and it was impossible for us to satisfy the demand.
A few days later Grant introduced me to Olcott, who gave me quite a
dissertation on how to run a trust company. He said that the most
important thing was to have no men around who had any “yellow” in them
and that the president must get the business and leave it to the other
officers to execute it and carry out the details. He laid the greatest
stress on the fact that the head of a company must disregard details
entirely.
“He ought constantly to have his mind,” said Olcott, “on the larger
matters, and should abstain from doing any work that can be done by any
expert help that can be hired.”
On my part, I gave to Olcott a sketch of how I thought the company
should be developed, explaining to him that the prejudice of the big
trust companies and banks against real estate was not justified, and
that the financial interests of New York had so far failed to recognize
the increased stability of real estate, due to the enlarged population
of the city and to the definite fixation of certain trades in certain
neighbourhoods. I instanced the financial centre in Wall Street; the
jewellery centre in Maiden Lane; the retail centres, and the definite
northward development of Broadway. I also explained how many very
substantial men had entered the real estate field, and how the general
prosperity of the country had improved values in New York City.
“Now,” I said, “this group of successful men can only handle the large
units that the exigencies of the time are demanding if they have
additional financial facilities given them. Those facilities our company
should provide.”
I explained how many groups of men had formed real estate corporations,
only to discover that even then their resources were inadequate to
handle all the profitable business that was coming to them. I told of
some of my own larger transactions; how I always had to get others to
help me finance them, and how, therefore, such a company as the one we
proposed forming would undoubtedly become the syndicate manager of some
of the larger operations. I told him if he had no objections, we could
secure large deposits. Olcott replied that my plans would in no way
conflict with his corporation, and that I should do any business that I
deemed profitable. He asked me whom I wanted on the board, and I told
him that I should like to have some representatives of the Mutual Life
Insurance Company, who were then the largest investors in mortgages on
New York City real estate, and suggested Messrs. Juilliard and Jarvie,
the two best known and most influential members of its board.
We settled on a number of other directors, and a few days later Stillman
sent word that he wanted some of the stock. Olcott agreed that he should
only be given some of the stock if he consented to serve on the
Executive Committee. Post and Southack, who had brought the message,
hesitated to deliver this answer, as they thought we ought heartily to
welcome Stillman’s interest in our corporation, and when they put the
proposition to Mr. Stillman, he asked them, in his mystifying manner,
whether this was an ultimatum. They hesitated to admit it. They were
really afraid of him, and he was simply tantalizing them about his
acceptance, which he finally gave them. He was allotted only 200 shares,
and within a year he sent for me and in his peculiar teasing way told me
that he was dissatisfied with his connection with the company. When I
asked him why, he said that he had not a sufficiently large interest. I
had to coax Olcott to sell 300 of his 1,000 shares for as much as he had
paid for his entire 1,000. I doubt if I could have persuaded him to sell
to any one else. It was simply, as he put it, that he wanted the
satisfaction of making “that smart neighbour of his”--as he often called
Stillman, their offices in adjoining buildings--“put him on velvet in
this transaction.”
I shall tell later on how, several times, I had to go on bended knees to
have some of these men accept what seemed to me tremendous profits.
I was now ready to proceed to business, as president of the Central
Realty, Bond & Trust Company.