It’s 3 a.m. Aymer Vinoy Laughner, son of an oil baron and savvy businessman, entertains various well-to-do friends and celebrities at his St. Petersburg, Fla., home. Among them is Walter Hagan, the celebrated golf pro of the 1920s, and Gene Elliott, a big-time real estate developer.
Laughner makes a wager with Elliott that will change the face of St. Petersburg forever…
The bet is this: If Walter Hagan can drive three golf balls off the face of Laughner’s pocket watch without damaging it, Laughner will buy the 12-acre site across the street and build a resort there.
I still have a hard time imagining it, but they place the pocket watch out on the lawn somewhere.
Hagan succeeds, bouncing golf balls off the face of the watch, but never breaking it. Moments later, the men draw up a contract on a brown paper bag for the purchase of a 12-acre site that would open two years later as the Vinoy Park Hotel.
The story that follows is historical, but it illustrates how the ebb and flow of markets never cease. It truly speaks to President Truman’s old line: “The only thing new in the world is the history you don’t know.”
The Vinoy opened in the sun-drenched opulence of the Roaring ’20s. Optimism and opportunity abounded. Think we had a real estate bubble? They knew how to put on a good show back then too.
Board writes of a lot selling for $500 on Monday and $1,300 on Tuesday… only to flip yet again for $2,000 on Friday. I looked over black-and-white photos in Prudy Taylor Board’s book on the history of the Vinoy. I saw some happy chaps in straw hats walking along a street near Tampa Bay. The caption actually read, “Smiling realtors.” In the background, I could make out a placard that read: “Our flowers never die.”
Bullish optimism at its best.
Signs of prosperity were everywhere. Building permits nearly tripled from 1920-1923. Bank deposits nearly tripled, too. All those real estate commissions, you see.
It wouldn’t always be smiles and easy money. The hotel itself passed through many ups and downs throughout its history. In fact, within 20 years of its grand opening, the Vinoy was in trouble. The property actually held up well during the Great Depression. War was what finally did it in.
In 1942, the number of guests dropped by more than 50%. Profits were insufficient to cover maintenance expenses and the interest on the mortgage. By 1943, the Vinoy ceased operating as a resort. Instead, it became the local headquarters for the U.S. Army Air Corps. Laughner wrote to his shareholders in his annual report that the lease with the War Department “was made against the better judgment of the officers and directors of the company, and was done mainly as a contribution to the war effort.”
Hard to imagine how different St. Pete must’ve looked in that dark year of 1943. Today, the palm trees still sway in the salty breezes off the bay. The sunshine beams as brightly as ever. But instead of chunky Americans with fanny packs wobbling around, there were GIs in combat fatigues marching in the parks.
By the end of 1944, the War Department canceled the lease. The good news was that the cash flow from the lease paid off all the debt on the property. The bad news was that the hotel took quite a beating and needed a major renovation.
Laughner sold the Vinoy in 1945 for $700,000. The saga continues, but I will stop here. I’ll add only that the hotel had years of ups and downs (and another closure) left in its future. In a nutshell, the Vinoy story is part of the ebb and flow of markets. Few investments are good for all seasons. What worked for a while later stops working. And what seems cheap today becomes dear tomorrow. And back again.
It takes time to work these things out. The Vinoy was profitable for years, but trouble encountered in ’42 essentially put it out of business by ’43. It’s always easier to destroy than to create. I stayed at the Vinoy recently for an investment conference in which I was a speaker. It’s a grand old hotel, looking like a pink wedding cake, with its distinctive observation tower on top dominating the view on the waterfront.
The market is itself always writing a new story. It’s hard to know sometimes where we are in the grand cycle of creation and destruction. But I think there are opportunities out there. It helps to have the kind of perspective that sees these long patterns. You come to appreciate that things take time. The recent credit crisis, for instance, will take some years to cycle through, just as it took years to wash out the effects of the 1920s speculative fervor. The banks and financials had a long run, both in the ’20s and in the two decades before 2007.
Now comes the long period of convalescence. As the Vinoy history illustrates in a nutshell, prosperity comes and goes…and comes back again.
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