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Harry Kelsey He Survived South Florida's 1920 Boom and Bust 11-17-77p4c', iL-- VILLAGE OF NORTH PALM BEACH HISTORIAN PA36 I VT 1 TE H e Survived South Florida's 1920s BBust- Harry Seymour Kelsey knew how to spot a trend. First there was the fast -lunch business. He got into it almost by accident, but nevertheless developed the concept into a chain of 112 res- taurants, bakers and commissaries . Then there was the '20s Florida land boom. He began buying land in 1919, and his Kelsey City -- today's Lake Park — is believed to be the first zoned community in Florida. Finally, there was the bust. If Kel- sey's 1925 sale of most of his proper- ty had not fallen through he would have been largely out from under before the collapse in land values of early 1926 -- plus the hurricanes of that year and 1928 virtually shut, down Florida development until World War II. If bust and blow weren't enough, Kelsey also had problems with the Internal Revenue Service. The government took the $1.6 million he received from sale of today's In- tracoastal Waterway and applied it to back taxes, and Kelsey was for six years under a federal indictment that included criminal charges. Even so, he fared better than many of the boomt-ime, developers. Although he . lost $8 million, he managed to rebuild his fortunes somewhat through such ventures as patent dealing and a pharmaceutical firm. He was looking to get back into Florida rea.l estate, with a develop- ment west of Miami named Utopia., when he died in 1957. Harry Seymour Kelsey was born March 26, 1879, in Claremont, N.H. When he was quite young the family moved to a farm near Springfield, Mass., where he learned about farm work but also received a . better -than- average education at public schools, Wesleyan Academy and the Connec- ticut Literary Institute. After a time as a linotype opera- tor, he got into real estate and soon became one of Springfield's more prominent young brokers. It was one of his less -successful deals .that led him into the restaurant business. Specifically he was left, after a trade, with a large stock of unsal- able restaurant equipment. Perhaps his experience as a busy business- man had led him to see the need for a quick -lunch restaurant. In any -case he leased a store in Springfield and in 1904 opened his first restau- rant. The concept caught on, and before long Kelsey headed a $4.5 million -a - year business with outlets in many major U.S. cities. But Kelsey soon became restless. He had the vision to conceive a busi- ness empire and the drive and char- isma to build one, but not the pa- tience to run one. Often he would never visit one of his restaurants again after the ribbon -cutting. Thus, when the interests that would make his holdings into the Waldorf chain offered him $3 million. he sold. His interest in Florida develop- ment began in the opening days of 1919, when he visited Palm Beach to rest up after a seige of pneumonia and to see the building lot a friend had bought for him at auction. He arrived on New Y'ear's Day and, two days later, his friend intro- duced him to a broker named Harry Greene. Evidently, it didn't take much persuading; according to Kel- sey himself, "That morning I bought 44,000 acres of land about 10 miles west of (the coast) known as the Old Barr Estate. Over the next two years, Kelsey invested heavily of his restaurant proceeds in Florida land. Among his holdings were the future sites of Palm Beach Gardens, Lake Park and North Palm Beach, as well as $ome 14 miles of oceanfront between Miami and Jupiter. The latter in- c1nded what now is Golden Beach, a portion of Pompano Beach, the f oceanfront section of North Palm Beach and the Seminole Golf Club property. i Once again Kelsey was in the fore- front. The prosperity set off by the end of World War I was manifesting itself in many ways, and one of those was the rush to Florida. A new era had dawned, and the bad experi- ences of those caught up the drainage land boom of a decade ear- lier had been forgotten. Many of the developments then be- ing planned -- such as George Mer- rick's Coral Gables, Joseph Young's Hollywood -by -the -Sea and D.P. Davis' islands in Tampa Bay were aimed at the well-to-do or re- tirees. Kelsey City was to be dif- ferent. Kelsey, who by then was living in Boston, hired the Boston planning firm of Olmstead Brothers to lay out his town. Tourist courts and trailers were banned. Areas were allocated for homes, recreation, business and industry. It was to be a city for those who worked. The industrial zone was in the west end of town, near the Florida East Coast (FEC) Railway. Included were the Kelsey City Nursery, sand - lime and brick plants, decorative stone and tile works, a rubber -tire factory, a model dairy farm and a lumber mill fed from more than 20 miles of track into the pine woods to the west. As for government, a mun- icipal charter was granted in 1923. "Kelsey City had everything, " re- calls Bryan Poston, who was born there in 1925. "There was a ball- room, brick factory, an icehouse and ice-cream plant, automobile show- rooms on Park Avenue, a lumber- yard cutting 200,000 feet of pine and cypress a day, banks, theaters, res- taurants, playgrounds d.nd parks." As for she name, ;,ire founder insisted that it was a surprise .rise t o him. "I was in Boston after I pur- chased the land and I read in the papers of an account by real estate brokers who said Kelsey .City was to be founded. It was the first I knew of it. They named it, too." Land booms, like locomotives, de- velop a momentum as they acceler- ate. At first the 1920s South Florida land boom, though rapid, had a steadiness about it. But as the years passed it not only became much more rapid but also hectic -- and artificial. While early transactions involved actual sale of land, by late 1924 and early 1925 the market was dominat- ed by so-called "binder boys," who dealt in options on property. This way they could generate a rapid turnover unhindered by the delay -- and possible price dampening -- of deed transfers. Some options changed hands a half-dozen times with no shift in property ownership. Those who had the land were no more conservative than those who had - the options. And the stereotype of the staid banker was somewhat weakened by the following, written by a vice president of a Miami bank: "Go to Florida . . . where en- terprise is enthroned . . 'where' you sit and watch at twilight the fronds of the graceful palm, latticed against the fading gold of the sun - kissed sky . . . where sun, moon and stars, at eventide, stage a welcome constituting the glorious galaxy of the firmament . . . where the whis- pering breeze springs fresh from the lap of Caribbean and woos with elu- sive cadence like unto a mother's lullaby . . . where the silver cycle is heaven's lavalier, and the full orbit as glorious pendart." As the boom progressed, the rela- tively stable developers such as Kel- sey, Young, Merrick and Miami Beach's Carl Fisher were joined by others who seemed to have no visi- ble assets other than dreams and ad- jectives. Picture City, a planned community near Hobe Sound that was to include a $1 million motion picture studio, never amounted to much more than a water tank and today is marked by nothing except pairs of aging concrete lamp posts along the west side of SR AIA. Nearby Olympia did little more than provide a name for the commu- nity until it eventually was changed to Hobe Sound. The central hub of Olympia, which was laid out to re- semble an Olympic arena, is. now the Hobe Sound ballfield complex. And then there was Indrio, in north. St. Lucie County. A series of ads in Time magazine showed archi- tect's rendering of "proposed" pla- A0, e- - �y4 AqE�- Z zas, bathing casinos and railway sta- tions and "suggested treatments" of homes in the adapted Mediterranean style of Coral Gables. This version of - "America's Most Beautiful Home Town" never got beyond the "pro- posed" stage, and it wasn't the only one in that category. On one occa- sion in a parody of a Florida bro- ker's spiel, humorist Will Rogers referred to a town -to -be as being "next to our proposed ocean. " In addition to the new towns, the old ones were growing. West Palm Beach expanded both north and south, into the Northwood and Fla- mingo areas. Other cities filled in areas that had been little more than laid out during previous develop- ment. Towns were being reincorporated as cities. Older unincorporated set- fl3ment.s were obtain ;1g charters so they either could have the services provided in the new communities or avert annexation by them. And other cities were virtually springing from the ground. As the 1920s began the area had only nine incorporated municipali- ties, the oldest of which was West Palm Beach (1894) . Others were Fort Pierce (1901) , Delray Beach and Palm. Beach (1911), Lake Worth (1913), Stuart (1914), Okeechobee City (1915), Pahokee and Moore Haven (1917) . Boynton Beach got its charter in 1920, followed by Lantana in 1921, Riviera Beach in 1922 and Kelsey City in 1923. Boca Raton and Jupiter came into corporate being- in 1925, Greenacres City and Gulfstream in 1926, Sewall's Point in 1927 and Belle Glade in 1928. "The whole strip of coastline from Turn to KELSEY, B10 Palm Beach southward was being . . . .rapidly staked out into 50 -foot lots," said Frederick Lewis Allen in his book "Only Yesterday," still one of the best accounts of 1920s mania. "The fever had spread to Tampa, Sarasota, St. Petersburg and other cities and towns on the West Coast. People were scrambling for lots along Lake Okeechobee, about San-. ford, all through the state . . . " Sales techniques were no more re- strained than were the ads. Consider this description of Young's promo- tion as described in "History of Hol- lywood" by Virginia TenEick: "This was open season for all those who had a nest egg and an appreciation of the good things in life. The salesmen blazoned banners from their offices. They jumped onto the running boards of cars en- tering town bearing "foreign" license plates, dropping Hollywood pamphlets on the laps of astonished passengers, accompanying the liter- ature with rapid-fire talks and effu- sive greetings. "They sent out `bird-dogs' (incon- spicuous persons . . . who would spot likely prospects, interest them in Hollywood development, and steer them to the salesmen. Bird-dogs re- ceived a 2 percent commission on the ultimate sales) . "Daily, all those salesmen who were within a half -day's driving dis- tance of Hollywood would fill their cars with prospects. Joyriders and boosters (persons who -- whether or not they had bought property -- were enthusiastic about the project and were helpful conversationalists to mix with new prospects) . They timed their trips so as to arrive just before noon, when they would drive, with much - gesticulation and articu- lation, the two -block length of Holly- wood Boulevard, turn south for one block and draw up with a flourish before the sales pavilion." After a free lunch and a tour of the city -to -be, "the salesman's real job began. The `heat' was turned on. If, after a half-hour or so of sales talk, the prospect was still indeci- sive, he was guided swiftly to the nearest `sweat room' (a hotel room or office booth) where a `high-pres- sure man' awaited him." Other prospects were brought in from all over the country, drawn by promises of free lunches and tours, with no mention of the hard -sell techniques to follow. The most ques- tionable developer of the post -World War II era did nothing some of his predecessors hadn't done. Stories of tremendous profits were legion, and further fueled the mania. A Palm Beach tract that sold for $800,000 in 1923 supposedly was worth $4 million just two years later. A poor woman who had bought land near Miami in 1896 for $25 sold it in 1925 for $150,000. Paris Singer, the sewing -machine heir, paid $1.75 million in 1925 for 250 lakefront acres adjacent to Kelsey City that had gone for a few hundred dollars several years previous. Not only was Singer a neighbor of Kelsey, he also was a partner. In February 1925 the two, along with architect Addison Mizner, announced plans for developing 1,000 feet of oceanfront east of Kelsey City into "an ocean resort, both winter and summer, for West Palm Beach and the country at large." Centerpiece would be a casino designed by Mizner. The project would be linked to the mainland via a causeway crossing Munvon Island. Even while he was planning new projects, however, Kelsey was tiring of old ones . About. that same time he sold his undeveloped mainland hold- ings for $30 million to a group head- ed by Col. H. D. Lindsey, a former mayor of Dallas. The Lindsey group had bought quite a bit of other land and- envisioned, among other things, a boulevard -lined waterway from Canal Point to the Loxahatchee River, flanked with estates. When the boom began to collapse, the Lindsey group forfeited its $100,- 000 downpayment and allowed the land to revert to Kelsey. In November 1925, Kelsey branched out in a different direction., He bought the Florida East Coast Canal, an inland waterway that had been dug from Jacksonville to Miami during the late 19th century but never had fulfilled its promise due to dredging and silting problems. Kelsey planned improvements to the toll waterway that would enable it to accommodate at least 50 large freight barges. Kelsey's waterway was not to be. Neither was his causeway. Both would f all victim to the Greet Bust, a downward spiral helped in its ear- ly stages by the very transportation problems that led to the canal plan. VILLAGE OF NORTH PALM BEACH HISTORIAN As boomtime construction ac- celerated, the stands of native lum- ber were exhausted. There was plen- ty of sand and gravel for concrete, but no cement. Besides, the process for mass-producing concrete blocks had not yet been perfected and hand fabrication was too slow. The only ways to obtain building supplies were over the single-track FEC, or by sea. And the two com- bined were inadequate. "Freight trains were so long that the engines jerked out couplings, " Hoyt Frasure said in his book, "Memories of Old Miami," written with Nixon Smiley. "Biscayne Bay looked like a dead forest, so many schooners lay at anchor waiting to be unloaded. In San Francisco, de- caying hulks of old schooners were taken out of `Rotten How,' loaded with West Coast lumber and sailed to Miami. Because the ships were too old to go round stormy Cape Horn they were towed through the Panama Canal." Flagler's successors made plans to double -track the FEC from Jackson- ville to Miami. Meanwhile, S. Da- vies Warfield was bringing his Sea- board Air Line (now Seaboard Coast Line) Railroad south on a curving course that carried it to Okeechobee City, thence southeast to West Palm Beach. As a way station on that stretch, he laid out Indiantown, building streets, houses, a school and the Seminole Inn. During the summer of 1925, ex- pecting the usual seasonal slump, the railroads cut back on operations to devote more manpower to laying new track. But the binder -boy eupho- ria was upon the land, and business continued unabated through the sum- mer months. Advertising was so heavy that the Miami News published an issue of 504 pages, which at that time was a record. The Miami Herald's ad busi- - ness for the year also set a record. Freight piled up at Jacksonville and other points. By the time the railroads realized what was happen- ing, it was too late to make headway against the ever-increasing flood of goods. On Oct. 29 an embargo was declared south of Jacksonville on everything except food 'or items for which special permits had been ob- tained. The effect on construction soon was evident. A lot in West Palm Beach that was supposed to be the site of "one of the most magnificent apartment buildings in the South" instead became the graveyard of hundreds of crated bathtubs — the only item to arrive before the em- bargo. The boom also was outracing elec- tricity and telephone service, both of which then were local in nature and the former often an adjunct to ice plants, which require large quanti- ties of power. In 1925 Florida Power & Light Co. and Southern Bell began the acquisitions that would conso- lidate service over almost all of the region, with the exception of Indian - town , and the municipal power plants in Vero Beach, Fort Pierce and Lake Worth. A business spiral such as that on the Gold Coast requires an ever-in- creasing inflow of money in order to maintain its momentum, even when down -payments are cheap and op- tions cheaper. A downturn about the time of the embargo led the develop- ment community to counter with a massive publicity campaign extol- ling the virtues of Florida and at- tacking as "malicious untruths" the warnings of those Who were saying it couldn't last. By February 1926, Trust Co. of Florida was offering 8 percent com- pound interest, about 2 percent above the prevailing rate, on first - mortgage bonds in an effort to at- tract sufficient investment capital. More ominously, large Northern banks were tightening up on credit. Before long the balance had swung and the magnificent houses of cards began tumbling down. As the capital stopped flowing, binder boys and buyers began de- faulting en masse. As Allen puts it, "There were cases in which the land not only came back to the original owner, but came back burdened with taxes and assessments which amounted to more than the cash he had received for it; and furthermore he found his land blighted. with a half -completed development." Small developers were ruined, and larger ones were set back. Some persons felt the collapse would be a long-range blessing, as it had weed- ed out fly-by-nights and would allow firms such as Kelsey's to resume growth at a saner level They reckoned without the Big Wind. Just as Kelsey was building a laundry for his city, the great hurri- cane of Sept. 17-18, 1926, roared northwestward through Miami, splintering the lower Gold Coast and killing 300 to 400 people when Lake Okeechobee breached its dike at Moore Haven. Damage was not that heavy on the coast north of Pompa- no Beach, but the black headlines in Northern newspapers scared off potential rf-sidents. And Kelsey had additional problems all his own. According to Charles Branch, who was general manager of Kelsey's East Coast Financial Corp., they stemmed from Kelsey's dislike for day-to-day busi- ness operation. He turned most of the detail work of Kelsey City de- velopment over to others. Branch says that when he took the East Coast job in 1925, an associate asked him, "When are you going to start stealing from the old man (Kelsey) ? Everyone else is." More seriously, according to Branch, Kelsey signed his tax re- turns without ever reading or check- ing them. And, according to the In- ternal Revenue Service, those re- turns seriously understated his in- come. When Kelsey sold the canal to the state in 1927, his proceeds were seized and applied to back taxes. And when the government found out that his cost of acquiring an ocean- front tract had been overstated by a factor of 10, more drastic action was taken. Not only were liens of $800,- 000 against East Coast and '$200,000 against Kelsey filed, but Kelsey was indicted on criminal charges. Kelsey managed to stay in busi- ness, and eventually won dismissal of the indictment on the basis that the error was an inadvertent mis- placing of a decimal point, but the effect of the entire affair on land sales was catastrophic. The worst single blow, however, came on Sept. 16, 1928. Almost two years to the day after the 1926 storm, another hurricane roared ashore, this one headed straight west through West Palm Beach. The toll in the Everglades this time was 2,400 and the publicity was so bad that the 1929 stock market crash was anti -climactic as far as south Florida was concerned. Businessmen, banks and cities alike were bankrupt. West Palm Beach had a per capita municipal debt in excess of $600, which it couldn't repay. Lake Worth was in a similar position. Some boomtime communities — such as Salerno — were disincorporated, and others were cut back in size. For instance, Ocean Ridge was formed in 1931 from what had been part of Boynton Beach. In Kelsey City the 1928 storm caused no death but a lot of destruc- tion. "It was a terrible storm," Pos- ton -recalled, "and people had no ad - Qi WAGE OF NORTH PALM BEACH HISTORIAN vance warning. Every family in Kel- sey City must have crowded into the City Hall, figured to be the most sta- ble building in town. 66.I've been told the building swayed 8 inches.. I was too young to be frightened. I thought it was all a big joke. -`mut when we left after the storm, I remember the whole row of stores along Park Avenue was flat- tened . . . Lumber was everywhere and our garage had disappeared." Damage was estimated at $1 mil- lion, with 200 homeless, 75 businesses destroyed and another 75 severely damaged. Kelsey tried to rebuild, but there was no more money "and I had to let the whole thing go." The "whole thing" included most of the original holdings. Exceptions included the Seminole Golf Club, which he had sold in 1.926, and the canal. Buyer was Sir Harry Oakes, who like Kelsey was a New Englander but Kelsey was quiet and Oakes flamboyant. Sir Harry had become enormously wealthy -- his worth once was placed at $200 million — through a gold mine in Ontario, and had become a baronet courtesy of King George VI in 1939 (he had be- come a British subject in 1915) . Oakes was brutally murdered -- the crime remains unsolved — at his Nassau home in 1943, but his cor- porations carried on. Over the years some $12 million was poured into Kelsey City, which in 1939 was re- named Lake Park, with not too much to show for it. The modern era for that part of Palm Beach County began in April 1954, when John D. MacArthur bought the Oakes holdings. The 25 - foot -wide lots into which much of Lake Park was platted were com- ,qec. P14 9� s bined in 75 -foot lots, and the spaces between the boomtime homes soon were filling in. On other Kelsey property, MacArthur developed the cities of North Palm Beach and Palm Beach Gardens. . As for Harry Kelsey, he returned to New England and busied himself with his patent -trading and pharma- ceuticals. Except :for a visit at the city's request in 1950, he saw little of the community that once bore his name except as he passed through by train on his way to winters in Miami. During the boom, he had begun a development near Sanford that quickly collapsed due to water problems, and he maintained an interest in the Orlando area in addi- tion to his Utopia project. He died in Orlando on Nov. 27, 1957, and was " buried in Springfield where he had built the fortune that fell victim to slump and storm. VILLAGE OF NORTH PALM BEACH HISTORIAN