“We Have Made a Number of Blunders During Our Career”: The Los Angeles Investment Company Building, 1912, Part Two

by Paul R. Spitzzeri

On 5 November 1913, one of the signal events in the 240-year history of Los Angeles took place as William Mulholland uttered the simple phrase “There it is, take it” as the gates were opened at The Cascades and the lifeblood of the Angel City’s development future poured forth from the Los Angeles Aqueduct, one of the engineering marvels of its time.

The chair of a committee proposing a memorial to this remarkable project was Charles A. Elder, president of the Los Angeles Investment Company (LAIC), which eagerly looked to its increased prosperous future with the precious fluid available to the thousands of houses it proposed to build in the city, especially in its largely undeveloped southwest section.

Los Angeles Times, 11 May 1913.

As the first part of this post noted, Elder came from Topeka, Kansas in the mid-1890s with a modest branch of his father’s financial and real estate syndicate and launched the LAIC with very little capital, but endless enthusiasm and boundless confidence in his abilities. While his early efforts were on a very small scale, the third major boom in greater Los Angeles, following ones in the late 1860s and first half of the 1870s (in which F.P.F. Temple and William Workman were important figures) and the Boom of the Eighties (largely occurring during the mayoral administration of William H. Workman), burst forth in the first years of the 20th century.

The LAIC seems to have expanded its operations in South and South-Central Los Angeles during that first decade and, with stock sales heavily targeted towards the middle class investor with funds in the low three figures, the firm was fond of touting its bona fides as a conservative and careful organization powered by the people, not by the wealthy. Its housing units were exemplified, as was the case throughout the region, by the very popular bungalow, a small dwelling with attractive architectural ornamentation, built-in storage and shelving, an abundance of wood and glass and other notable features.

Los Angeles Express, 21 May 1913.

The culmination of the LAIC’s early history was the building of its $1 million dollar (with another $750,000 invested in the purchase of the land and other expenses) 13-story, height-limit (capped by ordinance at 150 feet) steel and concrete skyscraper, completed at the end of 1912 on the northeast corner of Broadway and 8th Street. The company expressed great pride that the structure was erected without a lien or mortgage, as well as declaring that it was built by the common investor, numbering nearly 10,000 by the time the building was finished.

With the coming of 1913 came the announcement that the LAIC was mounting its most ambitious real estate development campaign to date, involving the construction of a large number of houses on land purchased from the estate of Elias J. “Lucky” Baldwin. This tract, including what is known as the Baldwin Hills, was, nearly four decades ago, part of the Centinela subdivision, with the president of the development company being F.P.F. Temple and he and William Workman owning a large share of the property involved.

Hollywood Citizen, 4 July 1913.

The Centinela project was to include a townsite, a precursor of Inglewood, a railroad to the Ballona Creek’s emptying into the Pacific Ocean, and plenty of farm lots and sales were held by auction in spring 1875. When the state’s economy foundered a few months later, a panic in Los Angeles led to the suspension of the Temple and Workman bank, which invested depositors’ funds in Centinela and other development projects during the boom since its opening in November 1871.

Rather than declare bankruptcy, sell their substantial assets to satisfy its creditors, and salvage what they could from the remainder for themselves, Temple and Workman took out a loan “on rather hard terms” from Baldwin. The deal, completed in November 1875, was an easy one for the San Francisco capitalist, who made his pile from a fortunate (that is, “Lucky”) sale of stock in Comstock Lode silver mines at the peak of the market and before the bubble burst. With several millions of dollars at his disposal, Baldwin began, in spring 1875, to invest in greater Los Angeles real estate, starting with the prize possession of the Rancho Santa Anita.

Times, 17 August 1913.

Fully aware of the desperation of Temple (Workman was a silent partner who had complete faith in his son-in-law) and appreciative of the two men’s substantial real estate portfolio, Baldwin made a safe bet with his loan, eventually just a shade above $340,000. When depositors rushed to close their accounts on the bank’s reopening in December 1875 and the institution collapsed the following month, Baldwin waited three years to foreclose so the loan could not possibly repaid. Among the properties he acquired was the Baldwin Hills and surrounding lands from the defunct Centinela project.

After Baldwin died in 1909, his daughters and heirs Anita and Clara, through their cousin and estate administrator Hiram A. Unruh, sold off large tracts of land inherited from their father. Among the new developments that sprung up in the early 1910s was Baldwin Park, North Whittier (Hacienda) Heights, and those areas of southwest Los Angeles acquired by Elder’s LAIC.

Express, 27 September 1913.

On 17 May 1913 (the 47th anniversary of the suicide of William Workman, despondent after the failure of his bank and loss of most of his fortune), the Los Angeles Express, which so enthusiastically covered Elder and the LAIC that one wonders how much investment its owner, Edwin T. Earl, had in the firm, provided an “Outline [of the] Baldwin Development Project”:

One hundred thirty-five miles of parked [landscaped?] residence streets; 32 miles of automobile boulevards; seven railway lines, including one rapid transit system; 1500 feet of bridges, two of them respectively 300 and 400 feet in length; 300 acres of park reservations; six civic centers; 20,000 homes of ordinary residence lots, costing $60,000,000; 500 homes, cost $5,000 and up, on half-acre sites, totaling $25,000,000; 1000 homes, costing $20,000 and up, on two-acre villa sites, totaling $20,000,000; one immense residence hotel to cost $3,000,000; 16 grammar schools and four high schools; [and a] 600-foot tunnel connecting with car lines to Redondo, Santa Monica, San Pedro and Long Beach.

These were denoted as just some of what was proposed by Elder and his firm and it was added that the cost of the land was $7 million and it was added that the company’s “engineering department is planning to expend $15,000,000 in improvements.” The Express added an extra zero in noting that “the homes to be built will sell for upwards of $1,000,000,000” when that number was actually somewhat north of $100 million.

Times, 31 October 1913.

In any case, the sheer scale and scope of this incredibly ambitions, for the time, project places the concept as something of a precursor to what later became known as “master planned communities” like Valencia in Santa Clarita and Irvine in Orange County. It was even rumored that, when the Bixby family decided to sell its expansive landholdings on the Palos Verdes Peninsula and Pittsburgh capitalist Walter Fundenberg (who’d recently bought what became Diamond Bar and its neighboring Tres Hermanos Ranch) proved unable to swing the complex financing involved, that Elder was among the frontrunners to buy what became an immensely valuable property—one that was covered in a previous post here concerning an audacious Palos Verdes plan during the next big boom in the early Twenties, that was filled was impossible promises and outright fraud.

Having conceived of and began work on “one of the most gigantic land settlement schemes ever believed to have been r[e]duced to a workable and feasible basis,” Elder announced within two weeks that the LAIC, as expressed by the Express, became “a closed corporation and that a syndicate of local bankers, capitalists, business and professional men has been formed to purchase all of the stock of the corporation that remains undistributed.”

Express, 5 November 1913.

While names were not released nor amounts of stock and their values were provided, it was stated that a majority of the syndicate was not connected with the Globe Savings Bank, founded by Elder several years prior and which was an anchor tenant of the LAIC Building. Instead, a well-known insurance executive and a national bank director were said to have gotten the syndicate going.

Moreover, the paper reported that the syndicate was to retain the directorate of the LAIC “and will have no voice in the management of the affairs of the organization.” To demonstrate the financial power of the firm, it was stated that paid-up capital in stock was $5 million with surplus and undivided profits “practically $12,000,000,” so that the $17 million attributed to the company definitely made it sound as solid and steady as it could be.

On 7 June, Elder celebrated his 40th anniversary in the real estate game and what looked to be the pinnacle of his celebrated career as the Sierra Madre Club, a private entity that was the other major tenant with his Globe Savings Bank in the LAIC Building, hosted a lavish banquet in his honor. Lionized by some 250 guests, Elder basked in the radiant glow of this tribute and speakers included Philip D. Wilson, the secretary of the Los Angeles Realty Board, Harold Janss of the well-known development firm that built much of the Westwood area and many other projects in the region, and Elder’s long-time LAIC associate, the company’s secretary, William D. Deeble.

Times, 7 November 1913.

A month later, however, the Hollywood Citizen took Elder to task in an editorial focusing on why the real estate developer was so opposed to the recently enacted “blue sky law.” These state statutes were passed during the Progressive era to regulate stock sales and limit fraud and the name came from the idea that speculative enterprises sold stock that were often backed by nothing other than the “blue sky.” Notably, the first state to pass such a law (in 1911) was Kansas, where the Elders had their first syndicate and, within a couple of decades all of the states, save Nevada, had them.

The Citizen excoriated Elder for his determined opposition to these measures and wrote that the developer’s philanthropy was such that “he never thinks of himself but confines his attention to the interests of the ‘groceryman, the manufacturer, the farmer and the merchant’ whose interests he alleges the ‘blue sky law’ will seriously affect.” The paper went on that “we have any number of shining examples in the city of Los Angeles of where government investigation would have saved a mint of money for the investor” who might fall for the seductive advertising of the speculator only to find that their $1.50 shares were only worth 40 cents when it was time to sell.

Express, 14 November 1913.

The paper lambasted Elder for his position against protections for the investor, concluding:

When a man, who distributes the enormous amount of advertising to newspapers that Charles A. Elder distributes, opposes a measure you needn’t expect to find any of the kind of newspapers that we have in this city supporting it. It[‘]s the people’s fight, pure and simple, but they are surely capable of defeating big newspapers [the Express?] and get-rich-quick corporation capitalists if they will.

Elder, however, pressed ahead with his southwest Los Angeles plan and, in fact, the advertising put his name above that of the company and he took to writing articles, again in the Express about the development potential of that portion of the city and more broadly. As he pushed his project on the Baldwin tract, blandly called the 1700 Tract, and highlighted all that was in the offing with it and others (including the recently completed LAIC projects in the College and New College tracts near the University of Southern California), he observed, “it seems fairy-like and yet, with the continued prosperity of Los Angeles, with the steady growth that it is bound to have for decades to come, with the opening of the [Panama] canal and the development of the [Los Angeles] harbor, these 30,000 or more homes will be only one unit in this vast section of the southwest side.”

Elder in one his ads called the LAIC “the largest co-operative building and subdividing company in the world” and, in another, he proclaimed that the only area of real growth within Los Angeles was in its southwestern portion and offered that “exactly the same thing that happened in the western section of the city, logically, must happen here.” In the inexorable force of development of the Angel City, the LAIC stood ready with its $16 million of total capital to “develop their six-thousand-acre Baldwin Hills into the most magnificent metropolitan home community in America, and it is the largest subdivision adjacent to a great city in the world today!”

Express, 12 September 1914.

By late September, Elder worked himself into quite a lather about the continued expansion of the Angel City’s population, the need for houses and the role his firm would play in meeting the demand. He averred that “the growth of the city is never ceasing. Los Angeles has unrolled itself from foothill to foothill, from valley to valley, and is now reaching out toward the ocean.” With the rise in resident numbers, “the Los Angeles Investment company is today holding millions of dollars worth of property, secure in the knowledge that the new population of tomorrow and next year and of the years to come will create a demand that will make these properties more and more valuable.”

His company was to be integral to the future of Los Angeles and “what great and important links it has welded in the chain of the city’s growth to the ocean, the people of this city know.” In converting cattle grazing and barley farming land to tracts “dotted with cozy bungalows,” the LAIC “has always believed in Los Angeles” and, he argued, “has . . . done more to develop the Southwest residential section than any other interest or influence.”

Express, 9 November 1914.

At the end of October, Elder engineering a merger between his Globe Savings Bank and Home Savings, so that the latter would now boast of some $1 million in capital stock and likely keep the LAIC Building bank location as a branch. Elder told the Express “that he is glad to retire from the banking business, as it will give him more time for the rapidly growing business of the Los Angeles Investment company.”

Yet, just days later, the LAIC announced that it would forego issuing a November dividend, something rumored in the city’s financial world, though the company claimed that 90% of its shareholders agreed with the decision because, Elder explained, the $350,000 was to be used for its Baldwin Tract project.” He claimed, moreover, that a dividend would be paid out in December or January and stated that hundreds of workers were readying the tract for the expected 1914-1915 boom with $200,000 a month spent on the development.

Elder reassured readers that the only liabilities was on interest for $2 million in notes and certificates and some land was acquired with balances due, but most was purchased without debt and he pointed out that the Broadway and 8th skyscraper was owned free and clear by the company. When asked about the declining price of LAIC stock on the local exchange, he blithely replied that, while the share price, at $1.15, was ridiculously low, “I prophesy that a year from today you cannot buy any stock at less than $5 per share, which is about its real appraised value. But, the article ended by noting that the stock was, at the first of September, selling for $4.12, so the current value was about three-quarters lower, a troubling sign, to be sure.

Times, 31 July 1915.

So, just two days after Elder opined on the need of Angelenos to memorialize the great Aqueduct, his firm was obviously under water. On the 7th, the Express reported on meetings with the LAIC that indicated a change in leadership was soon to come and the stock price did jump over 26 cents on the news. Deeble, however, was asked about reports that a federal grand jury was investigating the firm and, while saying he was unaware of any official activities by that body, the company was solvent.

Elder, though, told the paper “the Los Angeles Investment company has lost the confidence of the general public. It is useless to deny that fact.” He insisted, however, hat stockholders were not only supportive of he and his compatriots, but that they would have won reelection to the directorate in January had they wished to fight for it. Claiming to act only in the best interests of the shareholders, he added:

I have worked faithfully for this company and its stockholders. Next to my family, I love this company best. Of one thing I am sure, and that is the directors, when they accept our invitation [to take over the firm], will, on investigation, find that we have conducted the business honestly. I am confident that they will find that we have been honest.

Whether we have acted wisely is for them to decide. Undoubtedly the directors have made some mistakes.

Referring to the firm’s “gold notes” sold to investors, Elder said these were the firm’s only obligations, but added that a loan of $800,000 from the Metropolitan Life Insurance Company was expected to be finalized very soon and “will be used for the retirement of gold notes and for new development work.” The paper told him that the word on the street was the loan would instead be used for the LAIC’s Guarantee Fund to protect stock and that this was intended to forestall the federal grand jury investigation, but Elder denied such was the case.

Express, 11 September 1915.

The next morning’s Times reported that the LAIC was reorganized the previous evening with such well-known business figures as banker Stoddard Jess, attorney Henry O’Melveny, store owner D.A. Hamburger, real estate developer Robert A. Rowan and the Times’ own Harry Chandler as among the new directors and that these men hired Austin O. Martin of the Centinela Land Company as the new manager.

On the 11th, the paper reported that an audit of the company’s books was underway and Elder pledged not to take a penny out of the firm until every stockholder got back their money and professed, “I have made no plans for the future and will make none until my name is clear” and that he would stay in the Angel City (he had a home on West 48th Street in one of the LAIC tracts.) He added, “it will be found that we have made a number of blunders during our career as directors of the company” but insisted that “in no case can anything dishonest in our management of the affairs of the company be found.”

Times, 20 October 1917.

Three days later, Elder, Deeble, treasurer George M. Derby and eight other former officers of the firm were arrested and charged by the feds of using the mail to defraud through its solicitation of investment of LAIC stock on false pretenses and promises. Elder and the first two eventually faced trial and managed to delay proceedings for months, but were convicted (the state dropped its investigation in favor of the federal prosecution) in late July 1915. Sentencing came in mid-September, with Derby and Deeble getting 13 months and a $5,000 fine and Elder having the same fine, but two months longer. The disgraced former company head issued a statement claiming,

I put my life into the company. If there was any wrongdoing I did not know of it. I went out with nothing . . . If anyone was defrauded I was the one. I was defrauded out of the savings of a lifetime. I am determined to show the people of Los Angeles that I was honest in my business dealings. In time I will show that. The best assets a man has is a clear conscience and good health and with these essentials, which I have, I will ultimately win.

Elder served a year at McNeil Island at Puget Sound in Washington state and was released early on good behavior. He returned to real estate and building, but never anywhere near the level he achieved before his stunning collapse. He long resided with a second wife and three daughters in a home in the Garvanza section of northeast Los Angeles that belonged to her parents. In 1954, just before he was to have turned 90 years old, Elder was smoking in a recliner and, as so often happened, fell asleep and the cigarette fell onto the fabric. He was carried out of the house but died in the fire—a sad end to a dramatic life.

Express, 31 October 1918.

Whatever animated Elder’s excessively audacious ambitions and whether or not he operated in good faith until his goals exceeded his reach, he turned to illegal machinations, perhaps in the hope that success in the Baldwin Tract would right his wrongs is an operating question. Banking and real estate are, despite his protestations otherwise, highly speculative and his failure is, in some respects, not unlike those discussed in this blog, such as those of C.C. Julian, Gilbert H. Beesemyer, F.P.F. Temple and Walter P. Temple—whether it was overreach or outright illegalities that were involved.

There are, however, many LAIC houses left in south and southwest Los Angeles, though many were built by the next generation after Elder and his associates. His concepts of master planning were forward thinking and his downtown headquarters was an impressive structure that still stands in good use today. His “blunders,” though, ruined him and the history of Los Angeles is filled with such stories from the time of the Temple and Workman bank failure onward.

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