Paradise for Sale

by Nick Wynne

  CHAPTER 14

  Of Bottom Feeders and Small Bumps

  During the years 1924–25, the state had a “super” boom that brought with it the making of fortunes and also the loss of many. Fundamentally, the state at that time was not in a stage of development sufficient to reap the advantage of such spectacular activities. The overwhelming demand caused by the influx of new residents, speculators, workers and tourists gathered momentum to the point where one development bringing money and workers appeared to justify other developments, and finally this tide of growth necessarily reversed itself when the projects became complete. But the intervening eleven years have done an enormous amount toward healing the wounds of that period.

  The definite percentage of growth in population each year due to natural causes, together with the steadily increasing influx of tourists and those in retirement making Florida their home, have caused most of the buildings that were left vacant at the recession of the 1924–25 “super” boom now to be occupied.

  —Harry H. Kellim, Coming! Another Florida BOOM!,

  pamphlet, 1936

  Try as they might, Florida boosters found it tough going to persuade the American public that everything was going to be all right in the Sunshine State. Frank P. Stockbridge and John H. Perry tried to do so in their book Florida in the Making, published in 1926. Was the boom over, they asked? Well, no, they answered, because there had never been a boom to begin with. “The activity in Florida land, viewed as a whole, is not a ‘boom’ in the sense that prices generally have been inflated beyond actual present values. On the contrary, most Florida property has been sold too cheaply.” This became the mantra of those who still believed that recovery to 1925 levels was possible, but it was almost like talking to themselves. Never again, at least not for several decades, would real estate prices approach anything like the 220 percent increase in home values that marked the years 1924 and 1925. Neither would there be a return to the days when millions of dollars could be made on an investment of land purchased for a few thousand—at least, not until many years later. In the words of one St. Petersburg developer, “We have simply run out of suckers!”

  Granted, there was some improvement in the numbers of tourists who visited the Sunshine State in 1927 and 1928 (and even 1929), but many of these were holdover reservations from previous years. Others were individuals who had investments in the stock market, and 1928 and the first half of 1929 were good years for them—and, of course, everybody knew that bubble would never burst. Somehow, so the Florida optimists reasoned, the continued growth in the value of stocks and bonds augured well for a return of boom conditions. Even Stockbridge and Perry saw a connection between the activities of traders on Wall Street and the land boom in the Sunshine State. “One might as well ask whether the Stock Exchange rests upon a sound and stable base,” they argued, questioning the underlying values of Florida real estate. Their question was answered in October 1929.

  There were other ventures in Florida that reignited hopes that the bust would soon be a thing of the past. One was a miniboom in oil exploration. In 1927, J.L. McCord, a wildcatter from Oklahoma, drilled a deep well at Monticello and brought up soil saturated with crude oil, but further drilling produced nothing. That same year, John Ringling, Owen Burns, J.H. Lord and the Palmer family group in Sarasota invested $100,000 in a company headed by Kenneth Hauer of Miami to undertake exploration operations on land Ringling owned in southwest Florida. The city was ablaze with “oil fever,” and a public meeting was held to attract more investors. Hauer, aware of the attitude of many Floridians about any new speculative adventures, warned the Sarasotans to be wary of unsound schemes but then promised, “If oil is really found…there will be glory enough and money enough for all, it means another awakening for Florida. It means untold prosperity.” B.F. Alley, the site geologist, promised that huge deposits would be found in just three months and assured the crowd, “The real estate boom was a mere shower compared to the cloudburst of money that is coming to this section with the oil boom—and that boom is coming just as sure as we are seated here.” The State of Florida encouraged the speculation by offering a $50,000 prize for the first producing oil well in the state. (It was claimed by the Humble Oil Company in September 1943.) Even though Ringling and his sister-in-law, Edith, leased more than sixty-five thousand acres to Hauer’s company, the oil boom went nowhere. All it did was provide a small and temporary bump in the state’s flat economic landscape.

  Movies, which had originated with the Kalem Studios in Jacksonville, seemed to offer some hope for the flagging Florida economy. Metro Pictures, which would later become MGM, opened its first studio in the city in 1915. In 1920, Richard E. Norman purchased the bankrupt Eagle Film Studio in Arlington, outside Jacksonville, renamed the company Norman Studios and began producing westerns, action films and romances aimed at a strictly African American audience. The impact on the overall Florida economy created by the Norman Studios operations was minimal and limited primarily to the black community. Still, it was something positive.

  Other studios in Florida moved to California, where the terrain offered a greater diversity than did the flat Florida plains and where the drier climate meant more days per year for outside shoots. Joseph Wesley Young, the developer of Hollywood-by-the-Sea, thought that Florida would make an excellent rival to California, and he tried to bring moviemaking back to the Sunshine State. Although Young went bankrupt before he could realize his dream, the idea remained attractive.

  In 1933, Sun Haven Studios opened on Weedon Island in Tampa Bay. T.C. Parker, a man with movie experience, convinced the island’s owner, Fred Blair, to back his dream of a studio facility on the island. Using the old San Remo Club as a sound studio, Parker and Blair planned to make twenty-four movies initially. They quickly found the club building unsuitable and built a larger soundstage, the Kennedy Studio Center. The first of what would eventually be three movies made on the island started filming on May 22, 1933. Chloe, Love is Calling You was a small success and led to the filming of the second movie, Playthings of Desire, which opened in St. Petersburg in September. The industry was impressed, and so were the people of Florida. Buster Keaton visited the studio and was so impressed that he considered bringing his own production company to the island. He wanted to wait just a little while to make sure the studio would succeed. It was a wise decision.

  The third and final movie filmed on Weedon Island by Parker and Blair was Hired Wives. Just as the movie was ready to be released, federal tax agents descended on the studio and closed it down for failure to pay taxes. They confiscated the prints of all three movies, the equipment and the new soundstage. Although the studio was leased to Walter C. Martin for two years, he could never get the operation going again. The movie industry was just another tiny—and temporary—bump for Florida’s failed economy.

  The economic destruction wrought by the collapse of the Florida boom and the physical damage caused by the hurricanes of 1926, 1928 and 1929 attracted bottom feeders who came to the Sunshine State to take advantage of the distress. In Boca Raton, the Dawes brothers, including Vice President Charles Dawes, swept in to glean the few dollars left from the Mizner debacle, and in their wake, they left even more damage. The Central Equities Corporation, led by Rufus C. Dawes, promised to bring the Boca project to completion in return for a controlling interest in the Mizner Development Corporation. Through a series of questionable transfers, the Dawes brothers wound up with most of the remaining assets and none of the liabilities. Although they had promised initially to invest $1.5 million in the company, they advanced only 10 percent of the agreed-upon amount. When the smoke cleared, the Dawes brothers wound up with all of the assets of Mizner’s company, including sixty-seven lots, almost eighty-eight acres of land and $10.5 million in outstanding purchase contracts. Once the company had been stripped of virtually everything of value, the company went into bankruptcy. This left about 175 creditors with nothing but $4.1 million in unsecured claims against the corporation
. Although it took three years for a settlement to be reached, these creditors received only .001 percent of their claims.

  The real estate holdings, which were held by the Dawes brothers, were sold to Clarence Geist, who had been an original stockholder in the Mizner Development Corporation and a former partner of Vice President Dawes, for a paltry $76,350. Rufus and Henry Dawes then became stockholders in his new syndicate. Bottom feeders!

  Carl Fisher, who had predicted the end of the boom in Miami and had taken his cash to start a new development, Montauk Point on Long Island, still owned considerable hotel property in Miami Beach in 1926. Through careful oversight of his managers, he was able to keep them profitable through 1928, but with the collapse of the stock market in October 1929, revenues began falling. The Montauk Point project continued to drain his resources. So, too, did a costly divorce and a new marriage.

  Seeking to duplicate his Miami Beach success on Long Island, Fisher discovered that his biggest competition came from the long-established watering holes of the northern rich, and no amount of slick advertising could overcome his competitors’ advantage. In addition, the Florida bust had made most investors leery of putting money in developmental projects, and he was forced to underwrite the cost of building his project almost entirely. The failure of many banks in the aftermath of the stock market failure dried up the last remaining money sources. Nevertheless, he held on, determined to grab victory from the jaws of defeat. His problems were exacerbated by the failures of his peripheral investments and by his increasing reliance on alcohol to ease the pains of a soulless marriage and declining income.

  In Miami Beach, notorious criminals, including Alphonse “Scarface Al” Capone, purchased homes in the most exclusive parts of the town beginning in 1929. By 1932, Miami Beach’s reputation was that of a mob-controlled town where gambling and crime ran rampant. Certainly, the Miami Beach of the 1930s was vastly different from Fisher’s dream of an exclusive enclave for the newly rich. By 1934, his Montauk Point development had gone belly up after he defaulted on loans and taxes. The only remaining asset he had was the Bayshore Company, which operated the hotels he had built on Miami Beach, but control of that corporation passed into other hands, and he was reduced to living on a fixed salary. What first started as a $50,000 a year salary was gradually cut to a mere $10,000. One by one, he sold off his possessions, including his home—which became the Beach and Tennis Club, a gambling establishment operated by two crime figures.

  Gradually, the effects of his increasingly large booze habit, physical illness and depression took their toll. Fisher died in 1939, a financial failure. Interestingly, however, he was named one of the Fifty Most Influential People in the history of the Sunshine State in a 1998 survey by the Lakeland Ledger.

  George E. Merrick suffered much the same fate as Carl Fisher, although his life did not end as tragically. Without a large personal fortune, he built Coral Gables on a pyramid of credit and loans. With the devastating hurricane of 1926, followed by unusually cold winters and a second hurricane in 1928, the foundations of this pyramid began to crumble, eventually causing a complete collapse. Within months, he and his wife were reduced to operating a small fishing camp on Matecumbe Key, where, in 1935, another hurricane destroyed the camp.

  Gone was Merrick’s ability to shape the destiny of the city he had created, but his ideas lived on after he lost control. The University of Miami, to which he had pledged $5 million and to which he actually gave $1 million, was a reality that lived on. However, in the face of such adversity, George Merrick pressed on. In 1934, he and his wife formed George E. Merrick, Inc., a successful real estate firm. He became chairman of the Dade County Zoning Commission, served as a director of the Fairchild Tropical Garden and, in 1940, became postmaster of Miami. In 1939, along with Gaines R. Wilson, he devised a strategy for creating the Historical Association of Southern Florida, an entity that is alive and flourishing today.

  George E. Merrick died in May 1942. He left a legacy of a man who dreamed big and failed big but always had the best interests of the larger Miami community at heart.

  David Paul Davis, unlike Merrick, did not survive the first bust in 1926. Unable to meet the financial demands of completing his Davis Islands project and terribly in debt with his Davis Shores development in St. Augustine, he vanished in the mid-Atlantic—a victim of depression or robbery or the perpetrator of the greatest disappearing act since Harry Houdini. Like Merrick, he did leave an enduring legacy with Davis Islands, but his Davis Shores project “died aborning.”

  Harry Eagle, a small developer in St. Petersburg whose Eagle Crest development opened in late 1925, lost it to creditors. He returned to New York, where he soon cornered the silk market but lost everything because rayon, a synthetic and cheaper fabric, became available and replaced silk in the textile market. Unable to handle this second failure, he committed suicide in 1928. D. Collins Gillette, one of the major players in the development of Temple Terrace, also lost his fortune when the boom collapsed. Once a partner of Barron Collier and August Heckscher, he died virtually penniless in the early 1930s. It was a story repeated time and time again. Think big, borrow big, build big and lose everything.

  Alfred I. du Pont, among the wealthiest persons in the United States, moved to Florida to take advantage of the depressed economic conditions that followed the 1926 bust. With a personal fortune of $34 million, he was perceived as the savior of the Florida economy when he first arrived in Jacksonville and took up residence. Along with all that money, du Pont brought his brother-in-law, Edward Ball, who would soon earn the nickname “the Machiavelli of Florida politics” and whose alliance with the notorious political “Pork Chop Gang” from the Panhandle made him the most dominant force in the state. Ball was du Pont’s factotum, the “doer” who effectively and ruthlessly carried out Alfred’s wishes.

  Du Pont was interested in investing in land and banks, not in the developments of South Florida or the flimsy chain banks that participated in the thievery that brought about the bust. And he was not interested in building great communities, but rather in acquiring vast areas of undeveloped land and creating a financial institution that was as solid as any other in the world. He quietly started to accumulate land in the most inaccessible part of the Panhandle, which had escaped the frenzied developers of the boom era—hundreds of thousands of acres, enough to make even Barron Collier envious. Ed Ball was there to make his desires a reality.

  He acquired the Florida National Bank in Jacksonville and used it as the linchpin in banking operations that spread to Orlando, Daytona, Lakeland, Miami and St. Petersburg. His conservative philosophy in banking ensured that the Florida National Bank and its subsidiaries remained liquid and actually grew during the bust and the Great Depression. His financial resources protected them during runs, and, as David Nolan wrote, to keep them that way,

  Ball scurried across the state by plane and car to deliver cash where it was needed, guarding it himself with a shotgun (in whose use he had become proficient as a boy, serving as night watchman of the family oyster beds).

  The FNB invested heavily in defaulted municipal bonds because they could be had for very low prices and because du Pont was certain they would eventually be redeemed. It was an act of faith on du Pont’s part, but it was also helpful to the state’s distressed communities, although some critics accused him of being predatory by doing so.

  There was also a progressive political side to Alfred I. du Pont. Even before his arrival in the Sunshine State, he had engaged in creating civic programs. In Delaware, he had financed a pension plan for elderly citizens out of his own pocket and continued to fund it until the state, embarrassed by his generosity and its failure to enact a similar program, took it over. In Jacksonville, he anticipated the New Deal by creating a public works program that paid unemployed workers to clean the streets and do the upkeep on city parks. Just before his death, he and Ed Ball worked out a plan to start a paper mill on his land in the Panhandle and to surround it with a
model town that included schools, a hospital and other basic community institutions. Although he died in 1935 before the plan became a reality, he left $58 million to ensure that loyal Ed Ball would carry it into fruition. While he might have gotten richer from his Florida dealings, Edward I. du Pont was no bottom feeder. The jury is still out on Ed Ball.

  Some optimists pointed to the continued development of smaller golf-oriented developments in the state as proof that the boom was not over. However, their claims of a building “bump” were not based on a realistic reading of the overall economy. Much of the building that took place in 1927 and 1928 came as a result of “money already in the pipeline” or commitments made before the collapse. Many of these developments were forced to scale back on the original elaborate plans and lasted only a few years. Some developments were left unfinished as funding dried up, and they were reclaimed eventually by nature.

  No one, not even the most enthusiastic supporter of the boom, could escape the realization that the bubble had burst, the good times were over and the likelihood of them coming back any time soon was nil. The Stock Market Crash of 1929 ushered the entire United States economy into the Great Depression, but for Floridians, it was not a new experience.

  CHAPTER 15

  A New War—A New Boom?

  Hope springs eternal in the human breast;

  Man never Is, but always To be Blest.

  The soul, uneasy, and confin’d from home,

  Rest and expatiates in a life to come.

  —Alexander Pope, An Essay on Man, 1734

  The bust came so fast in late 1926 and 1927 that there seemed to be nothing that could be done to stop it, but after enjoying such unlimited prosperity, few people doubted that the collapse was anything more than a temporary glitch. After all, Florida was Florida, the state where dreams came true. Florida boosters promised that the bust was temporary, merely a readjustment in the marketplace where the inflated speculative prices would automatically be brought into line with the true values of Florida land. The same boosters promised a new boom, one that would focus on industrial development and the exploitation of Florida’s unlimited natural resources—agriculture, minerals and oil. All that was needed was time, but time was the one commodity that was not for sale.