HomeMy WebLinkAbout1984-09-02 Forida's Boom, Bust Made Harry Kelsey a Survivor (Palm Beach Post)neC
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Florida's Boom, Bust Made
Harry Kelsev a Survivor
Harry Seymour Kelsey knew how
to spot a trend.
First there was the fast -lunch busi-
ness. He got into it almost by acci-
dent, but nevertheless developed the
concept into a chain of 112 restau-
rants, 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 — retarded Flori-
da development until World War II.
If bust and blow weren't enough,
Kelsey also had problems with the
Internal Revenue Service. The gov-
ernment took the $1.6 million he re-
ceived from sale of today's Intra-
coastal Waterway and applied it to
back taxes, and Kelsey was for six
years under a federal indictment that
included crithinal charges. Even so,
he fared better than many of the
boom -time developers. Although he
lost millions, 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 real estate, with a develop- 2:
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 Connect-
icut Literary Institute.
After a time as a linotype operator,
he got into real estate and soon be-
came one of Springfield's more
prominent young brokers.
Most of his deals appear to have
been remunerative. It reportedly was
one of the less -successful ones, how-
ever, that led him into the restaurant
business.
- -
Yesterdays
Specifically he was left, after
trade, with a large stock of unsalabh
restaurant equipment. Perhaps hi:
experience as a busy businessmar
had led him to see the need for 13
quick -lunch restaurant. In any case
he leased a store in Springfield and in
1904 opened his first restaurant.
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 charis-
ma to build one, but not the patience
to run one. Often he would never visit
one of his restaurants again after the -
ribbon -cutting. Thus, when the inter-
ests 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 bout of pneumonia and
to see the building lot a friend had
bought for him at auction.
He arrived on New Year's Day and,
two days later, his friend introduced
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 ocean) 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 some
14 miles of oceanfront between Mi-
ami and Jupiter. The latter included
what now is Golden Beach, a portion
of Pompano Beach, the oceanfront
section of North Palm Beach and the
Seminole Golf Club property.
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 experiences
of those caught up in the drainage
land boom of a decade earlier 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. Da-
vis' islands in Tampa Bay — were
aimed at the well-to-do or retirees.
Kelsey City was to be different.
Kelsey, who by then was living in
Boston, hired the Boston planning
firm of Olmstead Brothers — design-
ers of Central Park — 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 in to the pine woods to the west.
As for government, a municipal char-
ter was granted in 1923.
"Kelsey City had everything," re-
calls Bryan Poston, who was born
there in 1925. "There was a ballroom,
brick factory, an icehouse and ice-
cream plant, automobile showrooms
on Park Avenue, a lumberyard cut-
ting 200,000 feet of pine and cypress
a day, banks, theaters, restaurants,
playgrounds and parks."
As for the name, the founder insist-
ed that it was a surprise to him. "I
was in Boston after I purchased 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."
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 visible
assets other than dreams and adjec-
tives. Picture City, a planned com-
munity 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 Al A.
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 architect's
rendering of "proposed" plazas, bath-
ing casinos and railway stations and
"suggested treatments" of homes in
the adapted Mediterranean style of
Coral Gables. This version of "Amer-
ica's Most Beautiful Home Town"
never got beyond the "proposed"
stage, and it wasn't the only one in
that category. On one occasion, in a
parody of a Florida broker's spiel,
humorist Will Rogers referred to a
town -to -be as being "next to our pro-
posed ocean."
Other cities filled in areas that had
been little more than laid out during
previous development.
Towns were being reincorporated.
as cities. Older unincorporated set-
tlements were obtaining 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 municipal- i
ities, the oldest of which was West
Palm Beach (1894). Others were Forth
Pierce (1901), Delray Beach andc
Paim Beach (1911), Lake Worthe
(1913), Stuart (1914), Okeechobee;.
City (1915), Pahokee and Moore Ha-i
ven (1917).
Boynton Beach got its charter in+t]
1920, followed by Lantana in 1921,3
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.
W.J. (Fingy) Connors, who had
made a fortune bossing stevedores on.
the Buffalo docks, bought everything
available between Canal Point and
Okeechobee City — roughly 12,000
acres in all — and linked his holdings
to the coast with a toll road from 20-
Mile Bend to Okeechobee City on the
right-of-way of today's U.S. 98. It
would have been the first road from
the lake to the coast had not the road
that today is SR 80 to Belle Glade
been completed just months earlier,
"The whole strip of coastline from
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 Okeef,
chobee, about Sanford, all througt
the state ... "
Sales techniques were no more re-
strained than were the ads. Consider
this description of Young's promotion
as described in History of Hollywood
by Virginia Ten Eick:
"This was open season for all those
who had a nest egg and an apprecia-
tion of the good things in life. The
salesmen blazoned banners from
their offices. They jumped onto the
running boards of cars entering town
bearing foreign license plates, drop-
ping Hollywood pamphlets on the
laps of astonished passengers, ac-
companying the literature with ra-
pidlike talks and effusive 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)."
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 mil-
lion in 1925 for 250 lakefront acres
adjacent to Kelsey City that had gone
for a few hundred dollars several
years previous.
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
starting in 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'swaterway was not to be.
Neither was his causeway. Both
would fall victim to the Great Bust, a
downward spiral helped in its early
stages by the very transportation
problems that led to the canal plan.
As boom -time construction acceler-
ated, the stands of native lumber
were exhausted. There was plenty of
sand and gravel for concrete, but no
cement. Besides, the process for
mass-producing concrete blocks had
not yet been perfected and hand fab-
rication 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.
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 ev-
. erything except food or items for
which special permits had been ob-
tained.
The effect on construction soon
was evident. A lot in West Paim
Beach that was supposed to be the
site of "one of the most magnificent
apartment buildings in the South" in-
stead became the graveyard of hun-
dreds of crated bathtubs - the only
item to arrive before the embargo.
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 attack-
ing as "malicious untruths" the warn-
ings 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 -mort-
gage bonds in an effort to attract
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 manse. 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 per-
sons felt the collapse would be a long-
range blessing, as it had weeded 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 laun-
dry for his city, the great hurricane
of Sept. 17-18, 1926, roared north-
westward 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 Pompano Beach, but
the black headlines in Northern
newspapers scared off potential resi-
dents.
And Kelsey had additional prob-
lems all his own. According to
Charles Branch, who was general
manager of Kelsey's East Coast Fi-
nancial Corp., they stemmed from
Kelsey's dislike for day-to-day busi-
ness operation. He turned most of the
detail work of Kelsey City develop-
ment 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 (Kel-
sey)? Everyone else is."
More seriously, according to
Branch, Kelsey signed his tax returns
without ever reading or •checking
them. And, according to the Internal
Revenue Service, those returns seri-
ously understated his income.
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 oceanfront
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 misplacing
of a decimal point, but the effect of
the entire affair on land sales was
catastrophic.
The worst single blow, however,
came 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 damage to
Kelsey City was estimated at $1 mil-
lion in material terms, but the dam-
age to the city's image was incalcula-
ble.
NORTH PALM BEACH Mx LINN
Born in New Hampshire in 1879, Harry
Seymour Kelsey knew how to spot a
trend and built his fortune on them. His
career began with a fast -lunch business
that expanded to a chain of 112
restaurants, bakeries and commissaries
and gave him the capital to invest in
1919 in the Florida and business. His
Kelsey City — today's Lake Park — is
believed (to be the first zoned community
in Florida.
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 1926, and the canal.
The buyer was Sir Harry Oakes,
who like Kelsey was a New England-
er. But Kelsey was quiet and Oakes
flamboyant. Sir Harry had become
enormously wealthy — his worth
once 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 corpo-
rations 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.
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 prob-
lems, and he maintained an interest
in the Orlando area in addition to his
Utopia project.
He died in Orlando Nov. 27, 1957,
and was buried in Springfield where
he had built the fortune that fell vic-
tim to slump and storm.
Acc4t-
RIE .5
VILLAGE OF NORTH PALM BEACH
HISTORIAN