formerly enjoyed a highly profitable revenue from the legal sale of wines and liquors, which sale had a most important bearing on earnings, investment, etc. Hotels representing large investment and of good reputation cannot afford to mock the law and clandestinely dispose of wines and liquors, even though their operators might, for profit, stoop to so doing. The situation, however, is unsatisfactory and must be changed. Ways and means to compensate for the loss now suffered from this source are gradually being worked out.

In planning a new hotel, every source of revenue obtained in hotel operation elsewhere should be taken into consideration, and many new sources of revenue have been recently developed. The most important is the rental of space for commercial purposes,-stores and shops of various sorts. That this can be done in hotels of the very highest class, without impairing their reputation, has been thoroughly demonstrated.

Financing Hotel Buildings.-As to financing new hotel projects, the way is becoming clearer and simpler owing to the advancement of the hotel business, its standards of operation, and the characteristics of the men engaging in it. Similar standards for judging the desirability of a loan are applied to hotels as to other buildings. The first question is in regard to the nature of the property the borrower is prepared to furnish as security, and the usual questions as to land, buildings, matters of title, etc. are to be considered in the regular way. In addition to the actual tangible property, there is, of course, the important question of earning possibilities.

Hotels are often financed by placing mortgages with institutions, and, recently, considerable financing of new hotel projects has been accomplished by the sale of bonds. It has been found possible, in some instances, to provide for the cost of tangible property by the issuance of bonds up to 75 per cent, with preferred stock or junior bonds for the balance; common stock, if issued, to represent intangible assets or earning power. The rule of safety in the issuance of funded obligations requires that the income must not only cover the

fixed charges (including interest and sinking fund payments), but also leave a safe margin beyond these requirements.

It should be noted that financing of hotels and the ability of hotels to meet fixed requirements differs from the financing of office buildings, and even apartments, in the matter of irregularity of income, as most hotels are not blessed with an even flow of patronage throughout the year. This indicates why a greater margin of safety is usually required by bankers, and why it is most important to provide hotel enterprises with ample working capital.

Most hotels, even very successful ones, have lean periods when outgo is greater than income. In this connection it is desirable to arrange sinking-fund payments and interest dates so as to fall due when the hotel's patronage is at its maximum periods.

Leasing Hotel Properties.-In the matter of leasing hotel properties, it is impossible to state as a formula any fixed percentage of gross receipts which a hotel can afford to pay as rent. Gross receipts mean a wide range of possible earnings, according to the type of hotel involved. For instance, a hotel with a comparatively small revenue from room rentals and a large revenue from the sale of food (which is not particularly profitable, and very often results in loss) would have a net revenue entirely different from another hotel of the same gross revenue where the conditions were reversed. Another illustration is an item of revenue from the rental of stores, which might easily mean as much net to the hotel enterprise as quite a number of times this amount from other sources. In fixing rent, therefore, a very careful and expert forecast of earnings is a prime requisite.

The safeguard to owners, which may be required on a leased hotel, which meets the requirements already enumerated will depend very largely upon the lessee-his character, reputation, experience, etc.-or, if the lessee is a company, upon the personal characteristics of its principals and, in both cases, upon sufficiency of working capital. A frequent requirement is a chattel mortgage on furniture and fixtures, to be installed free and clear of encumbrance. It is generally assumed, with reason, that a tenant capable of meeting this requirement is

sufficiently qualified and sufficiently interested to make good. The most important and intelligent stipulation of an owner may well be the carefully prepared forecast of earnings, showing conclusive probability of success by the intelligent, qualified operator.

CHAPTER XXV

SPECIAL PURPOSE BUILDINGS

By BLAKE SNYDER

Arcade. An arcade is an effective and profitable use of space where property is so located that there is opportunity to provide a short cut between two important streets. Obviously, the more important the streets the greater the success of the arcade stores. We find arcades usually in the middle of long blocks where the parallel streets are good business streets, in railroad terminal buildings, and in prominent buildings where the plot is large enough adequately to develop the street store values and still to leave room for inside arcade stores or arcade show windows. Where there is not enough space available for fine stores off the arcade, then showwindow space is developed and rented in connection with the upper floors. Such a display window adds to the value of an upstairs location.

Arcade corridors should be at least 10 to 14 feet wide, lined. on each side with show windows to within about two feet of the floor. Stores should range from 18 by 24 to 25 by 40 feet.

Where an arcade building is to be higher than one story careful analysis of the conditions must precede the designing and erection, for there is a prejudice against shopping above the street. Such a building is, in reality, a market place with two or three floors. Decision must first be made as to whether or not tenantry of the building will develop into a business community for the sale of high-priced and exclusive goods, or whether it will be a community for the sale of popularpriced goods. Foresight in this matter must be accurate and the policy determined upon must be carried out fearlessly. Though it is essential to the success of the building and of its tenants that it be occupied as quickly as possible, one or two

tenants, whose business, or whose business methods, do not fit into the general policy will seriously affect the building's future. Therefore, more than usual care must be taken in selecting tenants.

The group of merchants in an arcade have an excellent opportunity to use their individual and personal interest to increase business. They must deliver reliable goods promptly. They should organize themselves for the cooperative selling of the arcade idea. They should advertise collectively as well as individually; advertising by the tenants should be supplemented by direct advertising of the arcade by the owners. In order to foster this spirit of cooperation the relations of the owner of the building to the tenants should be unusually close.

There are comparatively few good-sized cities in the country which do not have one or more arcade buildings. So successful have they been that many street-car lines have their terminals today in an arcade property. Railroad terminals also adopt the arcade idea, because the space rented to shops is not only a source of revenue but a great convenience to the traveling public.

EXHIBITION BUILDINGS

In many cities there has been developed a structure, known as an Exhibition building.

Such buildings contain a large hall or specially designed ground floor suitable for holding temporary exhibitions, together with as many other open floors as are practicable to meet the demand for permanent exhibition space. In this way the building caters to the various temporary exhibitions which are held from time to time, leasing the special exhibition area for a week or two weeks as may be required. The renting of the temporary exhibition floor involves either the sub-lease to an exhibition company specializing in getting up exhibitions of various kinds, or the leasing direct to exhibitors.

The permanent exhibition space is rented for from one to five years, and is usually handled direct by the owners of the property, in the following manner: The open or undivided floors which are set aside, instead of being divided in the ordi