Monday, August 1, 2011

Life Insurance Companies Engaging in Real Estate Speculation

The Jan. 10, 1912, New York Times article, "First Skyscraper With An Elevator," tells a romanticized version of the origins of the Equitable Life Building at 120 Broadway, a history propagated through an early, if not the original, example of corporate public-relations' spin doctoring meant to obscure the facts of a criminal enterprise behind the falsehood of public good.

This was done by mixing up the sequence of development of the original 1870 building with the unceasing building campaigns and enlargements undertaken subsequently. A pertinent section from the Times article:
From time to time, as the volume of the society's business extended, the offices were necessarily enlarged, and on Dec. 16, 1865, a special meeting of the Board of Directors was called to consider the question of erecting a building. That Mr. Hyde should have been willing to advise this step at a time when the assets amounted to only $1,500,000 and the income to only $971,000, illustrates the confidence with which he looked forward to the future growth and prosperity of the society.

An "Enormous" Structure Then.

A building that would surpass anything ever erected in the business section of New York City had been the dream of Mr. Hyde from the day he opened the offices of the new society. Many long discussions followed with his Board of Directors, but the President was firm in his belief that there was a great future for such structures in New York City, and the Equitable should be the company to lead the way.

The shrewd business men on the Building Committee refused to consent to Mr. Hyde's plan, declaring in the first place that such a structure as he had in mind would be a useless extravagance and a losing venture. They said that not enough tenants would be found to fill such an enormous structure as he had in mind. When asked where the tenants were to come from Mr. Hyde replied "that the growing business of the society would occupy many of the offices, and that he would organize a Lawyers' Club, an Insurance Club, a Lunch Club, and other organizations that would fill the building.

In response to this statement the Building Committee declared that neither lawyers, clerks, or in fact anybody could be induced to walk up the eight flights of stairs of such a tall building.

"We will put a passenger elevator in and carry them up." To this time there was not a single office building in New York City in which passenger elevators had been introduced. For some time freight elevators had been utilized in warehouses and passenger elevators in hotels, but Mr. Hyde insisted upon their introduction into the Equitable Building against the advice of the Building Committee.

Finally all difficulties and objections on the part of the Building Committee were argued away and overcome by Mr. Hyde, and the purchase of the land upon which the original Equitable Building was erected on the southwest [sic] corner of Broadway and Cedar Street, was consummated in the Autumn of 1867. The first section of the present building was completed on May 1, 1870.
If the editors at the Times had checked their own archive carefully they would have found the following clipping published 37 years earlier. It is the publication of a private correspondence between a committee of lawyers who were already tenants in the original Equitable Building, or who were lessees of the soon-to-open first enlargement, to Henry B. Hyde, president of the Equitable.

Jan. 28, 1875, New York Times, "A NEW LAW LIBRARY:"
No. 120 BROADWAY, NEW YORK,
Jan. 25, 1875.
Henry B. Hyde, Esq., President Equitable Life Assurance Society of the United States, No. 120 Broadway, New-York:

DEAR SIR: The undersigned, who are now tenants, and those who have recently engaged offices in the Equitable Building, in view of the fact that a greater number of lawyers will be collected under a single roof than in any other building in the United States, desire to make a suggestion which they think will be greatly to the advantage of both the Equitable and the undersigned.

You may not be aware that it is the custom of the legal profession to keep the greater part of their books of reference at their residences, where their cases are chiefly prepared, while it is true that constant necessity exists for the use of the same books at their offices. Unless a lawyer possesses two libraries, he is compelled either to call upon his friends for the use of books which he may not have in his office, or resort to the Law Institute Library.

We would therefore suggest that the Equitable set apart a commodious room, to be used as a library by the lawyers who are tenants of the building.

From so large a number of tenants contributions of books as loans would afford a very respectable collection, and a small contribution each year from those using it would in a very short time furnish a library which would cause the Equitable Building to be sought as the most desirable place for lawyers' offices in the City, not only on account of its superior advantages so far as its offices are concerned, but from the fact that its tenants would have the exclusive use of a good library under the same roof with their offices.

In addition to this, the new arrangement in telegraphing from the courts and for messages might be introduced, and a bulletin kept of the court calendars, not only of the courts held in the City, but of the Supreme Court og the United States and the Court of Appeals.

We remain, yours respectfully,

WILLIAM FULLERTON,
S. W. FULLERTON,
HENRY E. KNOX,
HENRY E. DAVIES,
JULIEN T. DAVIES,
J. HENRY WORK,
HENRY M. ALEXANDER,
ASHBEL GREEN,
JOHN J. McCOOK,
CHARLES B. ALEXANDER,
V. VAN DYCK,
JOHN W. SIMPDON,
W. C. GULLIVER,
JAMES McNAMEE,
WILLIAM J. HARDING,
JOHN V. B. LEWIS,
CHARLES P. BULL,
J. HERRICK HENRY,
HENRY M. JONES,
JACOB F. MILLER,
THOMAS VAN VOLKENBURGH,
G. L. RIVES,
O. S. X. PECK,
F. R. RIVES,
WILLIAM S.PACKER,
CLARK BELL,
EDWARD T.BARTLETT,
PHILIP L.WILSON,
MERRITT A.POTTER,
D. A. HULETT,
OSCAR FRISBIE,
R. L. GARRETTSON,
E.J. GRANGER,
A. LATHAN SMITH,
PHILO CHASE,
MARCUS P BESTOW,
W. T. HOLT,
GEORGE A. BRANDRETS,
E. LUTHER HANILTON,
JAMES EMOTT,
HENRY L. BURNETT,
HENRY B. HAMMOND,
CHARLES C. EMOTT,
IRA SHAFER,
JAMES M. SLEVIN,
HERBERT B. TURNER,
DAVID McCLURE,
CHARLES DE FOREST LORD,
HENRY DAY,
DANIEL LORD, Jr.,
FRANKLIN B. LORD,
R. G. DE FOREST,
FRANCIS H. WEEKS,
LUTHER R. MARSH,
A. H. WALLIS,
W. F. SHEPARD,
JAMES T. B. COLLINS,
HAMILTON WALLIS,
WILLIAM G. WILSON,
THAOMAS M. NORTH,
J. LANGDON WARD,
J. LYON GARDINER,
ALFRED WAGSTAFF Jr.
W. A. COOK,
ALBERT STICKNEY,
PETER STARR,
HENRY M. RUGGLES,

EQUITABLE LIFE ASSURANCE SOCIETY,
No. 120 BROADWAY
NEW-YORK, Jan. 27, 1875.

To Hon. William Fullerton and others:

GENTLEMEN: I beg to acknowledge the receipt of your letter of yesterday, suggesting that this society shall set apart a commodious room to be used as a library by the members of the Bar who are now, or expect to be, tenants of the Equitable Building.

I would suggest that you should meet together at an early day, and fully determine among yourselves what plan will be desirable for the management of such an institution as you propose. I take it for granted that some organization will be necessary in order that rules may be adopted to carry out your views.

When the building is fully leased it will contain over one hundred lawyers, and I do not doubt that the law library which you have proposed will become in time of very great importance.

I thank you for the suggestion, which it is easy to see will add much to the already great advantages of this building. I am happy to inform you that the society will comply with your suggestion by placing at your disposal commodious rooms for the purpose indicated.

I should be pleased to meet with you or with a committee on your behalf, when it shall be my endeavor to render the details entirely satisfactory to you.

Your obedient servant,

HENRY B. HYDE, President.--Mail
The problem presented by this letter is more than it impinges on Henry Hyde's ingenuity in attracting lawyers as tenants to the original building by providing amenities and elevators. The 67 names listed as signing this letter to Hyde would have more than filled up the original 50 offices to let on the three upper floors of the 1870 building.

On page 109 of The Equitable Life Assurance Society of the United States 1859-1964, by R. Carlyle Buley, we are taken on a rapid ride:
The Building Committee [for the original building] made its final report January 25, 1871, and was discharged. But within two years the space allotted to directors, officers, clerks, and agents proved inadequate, so at a special Board meeting March 26, 1874, purchase of four additional lots on Cedar Street and one on Pine was authorized. Less than a year later the building to the rear of the main building was purchased from the Metropolitan Bank, and it became the Society's Law Library* (Footnote: *Purchase authorized January 27, 1875, price $80,000.)
So the Times' publication of the lawyers' correspondence suggesting a law library two days earlier, including President Hyde's reply dated the same day as the real estate purchase was authorized by the corporation, must be seen as awfully quick work in real estate terms, and the law library then, was used to justify a still further real estate purchase amid previous speculation.

Buley, on page 103, says that connecting to the great hall that housed the Equitable's offices in the original 1870 building, were "spacious dining rooms and kitchens, elegantly and appropriately appointed, for the daily use of the attach├ęs of the Society," putting the information in quotation marks, but omitting to footnote its source. It may be that this company dining room also admitted the lawyer-tenants, but it would be a stretch to call this an original manifestation of the "Lawyers' Club."

Apparently, the state laws governing insurance contracts limit policy-holders to the face value of their policies. Directors of insurance companies who invest wisely could rack up surpluses, which would remain outside the hands of policy-holders, but, supposedly, also outside the hands of the directors, who were limited to the salaries they earned. The nearly constant real estate activities of the Equitable Life Assurance Society was a way around that dilemma. Unfortunately, state law also prohibited insurance companies from speculative real estate development, limiting them to office headquarters, and the ownership on foreclosed properties.

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