East Florida

Type: Public Company
Address: One Malaga Street, P.O. Box 1048, St. Augustine, Florida 32085-1048, U.S.A.
Telephone: (904) 829-3421
Fax: (904) 826-2338
Web: http://www.feci.com
Employees: 834
Sales: $301.52 million (2002)
Stock Exchanges: New York
Ticker Symbol: FLA
Incorporated: 1984
NAIC: 482111 Line-Haul Railroads; 531210 Offices of Real Estate Agents and Brokers; 531312 Nonresidential Property Managers; 233110 Land Subdivision and Land Development

Florida East Coast Industries, Inc. (FECI) is the holding company for the similarly named railroad as well as a major land development company. Florida East Coast Railway, L.L.C. (FECR) operates a rail service on 351 miles of track between Jacksonville and Miami. Observers have called FECR one of the best-run railroads in North America. Flagler Development Company owns and manages more than seven million square feet of commercial and industrial space, and about 5,000 acres of other Florida real estate. Formerly called Gran Central Corp., its name was changed in 2000 to reflect the legacy of company founder Henry Flagler.

The name of Henry Morrison Flagler looms large in the history of the commercial development of the state of Florida. Flagler was a cofounder of the Standard Oil Co. with John D. Rockefeller. He sold his 50 percent interest in Standard Oil for $50 million and headed to undeveloped Florida to start his next venture. He was able to buy land very cheap with the purpose of building resorts for his fellow millionaires.

On December 31, 1886, Flagler bought the Jacksonville, St. Augustine and Halifax River Railroad. This small operation was incorporated in 1892 and renamed the Florida East Coast Railway Company in September 1895.

Flagler acquired the railway in order to carry affluent tourists to the luxury vacation destinations he was developing along Florida's east coast, beginning with St. Augustine, which had only 4,000 permanent residents at the time. The railroad marketed these destinations under the slogan "Paradise Regained."

The railway ran to Palm Beach, site of Flagler's Poinciana Hotel, by 1894. A wealthy Miami landowner, Julia Tuttle, encouraged Flagler to continue laying rails further south. Passenger service from Jacksonville to Miami officially started on April 22, 1896, according to Seth Bramson's Speedway to Sunshine: The Story of the Florida East Coast Railway.

The railway grew along with the developments as far as Key West, requiring the spanning of 150 miles of open ocean. Historian Dan Gallagher called the building of the Key West Extension the second largest construction project in the world during the first decade of the 20th century. Contemporary critics called it "Flagler's Folly"; of 4,000 workers employed in building it, 160 died.

The extension officially opened on January 22, 1912, after five years of work and a year before Flagler died. Of the $41 million he had invested in Florida, Flagler had put $10 million into the Key West Extension and $18 million into the railroads, according to Fort Lauderdale journalist David Leon Chandler.

FECR's fortunes soared during the local real estate market boom in the 1920s. The railroad was used to transport building materials as well as passengers. Return trips provided transportation for Florida's abundant year-round produce.

The 1929 stock market crash dealt FECR a blow it would spend decades trying to overcome. The railway declared bankruptcy in 1931 and would spend the next 30 years in receivership. A hurricane on Labor Day, 1935, wiped out the Key West Extension. Rail all along the Atlantic Coast faced new competition from U.S. Highway 1, completed in 1938, which stretched from Maine to the Florida Keys.

FECR emerged from bankruptcy in 1961, controlled by the Alfred I. duPont estate, represented by eminent Florida businessman Ed Ball. However, it faced a number of serious problems. Ball found the railway overstaffed and encumbered by union regulations. Under Ball's leadership, the railway withdrew from labor negotiations in 1963 and replaced all striking workers. It would continue to operate that way for many years, at the same time increasing its frequencies from three trains a day each way between Jacksonville and Miami, to a dozen, while reducing the number of crew members on each train from 15 to two. The violent strike was called off in the early 1970s, and few original employees were rehired. The strike shut down passenger service on January 22, 1963. This resumed on August 2, 1965, though a lack of business killed the service on July 30, 1968. In the 1960s, the railway lost a significant amount of cargo business to the embargo on Cuba, at the same time as competition from a parallel railway (the origins of CSX Transportation), two new interstate highways, and a more efficient Intracoastal Waterway, reported the Journal of Commerce.

Other cost-cutting measures included truncating cabooses from trains and using longer-lasting concrete railway ties instead of wood ones. FECR began to show consistent profits in the mid-1970s. The Arab oil embargo of 1973 had prompted many truckers to have FECR carry their trailers south on flatbed cars. A local labor organization called the Florida Federation of Railroad Employees began representing FECR workers in 1977.

FECR President Winfred L. Thornton was named chairman and CEO after the death of Ed Ball in 1981. The company underwent a restructuring three years later. Florida East Coast Industries, Inc. was formed as a holding company effective May 31, 1984. A new subsidiary, Commercial Realty & Development Co., was created to manage its 21,000 acres of property. The real estate arm was soon renamed Gran Central Corporation. It concentrated on developing commercial buildings. Operating revenues were $131.4 million in 1984; net income was $29 million.

The number of owner-operators plying their trade as truckers multiplied in the 1980s, and FECI itself owned two trucking subsidiaries: Florida East Coast Highway Dispatch, its delivery unit, and Florida Express Carriers, which operated to neighboring states.

FECI had estimated sales of $196 million in 1989. By this time, the real estate unit had built a million square feet of warehouse and office space, reported Forbes.

In August 1992, Hurricane Andrew washed away the historic FECR depot building that had been a part of Homestead's Florida Pioneer Museum. FECR posted a profit of $24 million on sales of $184 million in 1992. It had 936 employees and 442 miles of track.

FECI acquired trucking company International Transit, Inc. (ITI) in 1995. Based in Cincinnati, Ohio, ITI had revenues of more than $21 million a year.

Norfolk Southern Corp., the fourth largest railway in the country, considered acquiring FECR after it was offered for sale in February 1996. The two already cooperated on some shipments; a buy would have extended Norfolk Southern's line past Jacksonville to Miami. This deal did not materialize, though, and FECR was taken off the market a few years later.

St. Joe Corp., a Jacksonville industrial conglomerate with interests in paper, real estate, transportation, and telecommunications owned 54 percent of FECR. A bid to acquire the remaining shares fell through over the issue of valuation. St. Joe then began to sell off its diversified holdings to concentrate on real estate development. It spun off its 54 percent interest in FECI in October 2000.

In May 1999, FECI created the Orlando-based telecommunications venture, FEC Telecom Inc., which was soon renamed EPIK Communications Incorporated. Telecom companies often looked to railways for rights-of-way to run their fiber-optic lines. FECI installed a 780-mile fiber-optic line connecting a handful of major cities in Florida, and had been leasing access to other telecoms since the early 1980s.

FECI got a new CEO in 2000, 20-year industry veteran Robert W. Anestis, who succeeded Carl Zellers, Jr. Anestis, from Connecticut, had been a financial consultant to the railroad industry.

In July 2000, FECI's commercial real estate unit, Gran Central Corporation, was renamed Flagler Development Company to reflect its connection with pioneering developer Henry Flagler. It then owned 55 buildings and about 19,000 acres of land, mostly in Jacksonville, Orlando, Fort Lauderdale, and Miami. Flagler, which employed fewer than two dozen people at the time, was moving into a new headquarters and opening offices in Fort Lauderdale and Orlando as its staff expanded. In September 2000, the company announced plans to borrow money for the first time in its history to fund the development of its 16 million square feet of space in Jacksonville, Orlando, Fort Lauderdale, and Miami, reported the Business Journal of Jacksonville. Flagler also was buying property for development in Tampa.

On October 10, 2000, Flagler Development was spun off from the St. Joe Corp., which had owned a 54 percent interest in it since 1961 and held contracts to manage Flagler's real estate; the last of these expired three years later. This brought Flagler into competition with the Codina Group, half owned by St. Joe, which was building an industrial park to rival Flagler's main development in Miami-Dade County. The Alfred I. duPont

Further Reading

"Amtrak Inks Deal to Run Train Service Down Florida's East Coast," Miami Herald, June 3, 2001.

Barker, Robert, "Will Florida East Coast Share the Wealth?," Business Week, July 21, 2003, p. 88.

Barton, Susanna, "FECI Borrows for First Time: Strategic Move," Business Journal of Jacksonville, September 11, 2000.

Basch, Mark, "Jacksonville, Fla.-Based Property Firm to Spin Off Stake in Rail Company," Florida Times-Union, October 28, 1999.

------, "Railroad, Real Estate Is the Main Focus of Florida East Coast Industries," Florida Times-Union, November 27, 2002.

------, "St. Augustine, Fla.-Based Florida East Coast Industries Remains Profitable," Florida Times-Union, May 31, 2002.

------, "Zellers Retires from CEO Job," Florida Times-Union, November 12, 1998, p. E1.

Beard, Alison, "Real Estate Gains Put Railroad Operators on Track for Profits," Financial Times (London), May 21, 2002, p. 31.

Bennett, Jane, "Flagler Flies Solo; St. Joe Spinoff Finds Own Identity," Business Journal of Jacksonville, June 17, 2002.

Bluhm, Donald, "A Homestead Attraction Gone But Others Remain," Plain Dealer (Cleveland, Ohio), June 27, 1993.

Bramson, Seth, Speedway to Sunshine: The Story of the Florida East Coast Railway, Erin, Ontario: Boston Mills Press, 1984, 2003.

Calnan, Christopher, "St. Augustine, Fla.-Based Firm Unloads Telecommunications Division," Florida Times-Union, December 5, 2002.

Campbell, Gordon, "Palm Beach Museum Was Home of Visionary," Toronto Star, November 5, 1988, p. F37.

Chandler, David Leon, Henry Flagler, New York: Macmillan, 1986.

------, "King Henry," Sun Sentinel (Fort Lauderdale), August 24, 1986, p. 7.

------, "The Man Who Built Florida," Orlando Sentinel, October 12, 1986, p. 9.

Cohen, Judy Radler, "Will Florida East Meet Its Mate?," M&A Reporter, February 23, 1998.

Dinsmore, Christopher, "Virginia's Norfolk Southern Corp. Considers Buying Florida Railroad," Virginian-Pilot, February 28, 1996.

Drummond, James, "Land Bank," Forbes, October 2, 1989, p. 266.

Dunlap, Craig, "Florida East Coast Keeps on Track," Journal of Commerce, September 15, 1986, p. 9A.

Finotti, John, "St. Joe Corp. Abandons Florida East Coast Railway Merger," Florida Times-Union, November 21, 1997.

Gallagher, Dan, Florida's Great Ocean Railway: Building the Key West Extension, Sarasota, Fla.: Pineapple Press, 2003.

"Henry Flagler's Railroad Built Florida Vacationland," Plain Dealer (Cleveland, Ohio), April 9, 1995, p. 5F.

Kaufman, Lawrence H., "Carl Zellers, New FEC President, to Keep Railroad on the Same Track," Journal of Commerce, July 20, 1992, p. 4B.

------, "Fla. Rail Takes on Truckers in Jacksonville-Miami Run," Journal of Commerce, June 17, 1993, p. 3B.

------, "Union Bids to Recapture Fla. Railway," Journal of Commerce, September 21, 1993, p. 1A.

Lunsford, Darcie, "Flagler Development Prepares for New Role," South Florida Business Journal, March 24, 2003.

Mann, Joseph, "Switch in Emphasis; Florida East Coast Industries Still Rides the Rails, But Also Looks to a Fiber-Optic Future That Stretches Beyond Its Home State," Sun Sentinel (Fort Lauderdale), August 27, 2000, p. 1F.

Rublin, Lauren R., "Sand and Muck: They're Paying Off for Ed Ball's Old Company," Barron's, November 28, 1988, pp. 13+.

Talley, Jim, "Railroad Finds No Uphill Grade When It Comes to Profits, Growth," Sun Sentinel (Fort Lauderdale), April 29, 1985.

Whitefield, Mimi, and Raul Rubiera, "Florida East Coast Industries Attempts to Parlay Property into More Profits," Miami Herald, March 31, 2002.

— Frederick C. Ingram

Map of East and West Florida in 1810.

East Florida was originally a part of Spanish Florida. Under the terms of the Treaty of Paris (1763), which ended the Seven Years' War, Spain ceded all of its territory east and southeast of the Mississippi River to the Kingdom of Great Britain.

The British divided the territory into two parts, East Florida, with its capital at St. Augustine, and West Florida, with its capital at Pensacola. The settlement of the English colony at East Florida was heavily linked in London with the same interests that controlled Nova Scotia. The East Florida Society of London and the Nova Scotia Society of London had many overlapping members, and Council frequently followed their suggestions on the granting of lands to powerful merchant interests in London.

"Perhaps it is strange to think of such dissimilar geographic areas with such opposing climates as having much in common," said the Florida Historical Quarterly. "But if one considers naval and military strategy, one can see that these areas have a common significance, especially when viewed from London by the ministry. Halifax (Nova Scotia) was the command post for both the admiral and general in charge of the American forces.... St. Augustine evoked the same strategic considerations. These posts have been described as the two centers of strength to which the British army was withdrawn in the late 1760's."^[1]

The apportionment of lands in the new colonies fell to the same group of English and Scottish entrepreneurs and merchant interests, led chiefly by the Englishman Richard Oswald, later a diplomat, and the British General James Grant, who would later become governor of East Florida. A list of the grantees in both Florida and Canada show that the plums fell to a well-connected -- and inter-connected -- group. Lincoln's Inn barrister Levett Blackborne, grandson of Sir Richard Levett, a powerful merchant and Lord Mayor of London, came in for grants of 20,000 acres (81 km²) in both locales, for instance. Other aristocrats, nobles and merchants did the same.

The most powerful lubricant between the East Florida speculators and the Nova Scotia speculators was Col. Thomas Thoroton of Flintham, Nottinghamshire. Thoroton, the stepbrother of Levett Blackborne, had married an illegitimate daughter of the Duke of Rutland and often lived at Belvoir Castle, where he acted as principal agent to the Duke, who, along with his son the Marquis of Granby, were heavily involved in overseas ventures. Thoroton frequently acted as the go-between for Richard Oswald and James Grant, particularly after those two gave up their Nova Scotia Grants to focus on East Florida, where a drumbeat of steady speculation (particularly from Dr. Andrew Turnbull and Dr. William Stork) had fanned the flames of interest in London.^[2]

Both Floridas remained loyal to Great Britain during the American Revolutionary War. Spain participated indirectly in the war as an ally of France and captured Pensacola from the British in 1781. In the Treaty of Paris (1783), which ended the war, the British ceded both Floridas to Spain. The same treaty recognised the independence of the United States, directly to the north.

Spain offered favorable terms for acquiring land, which attracted many settlers from the newly formed United States. There were several territorial disputes between the U.S. and Spain, some resulting in military action. An American army under Andrew Jackson invaded East Florida during the First Seminole War. Jackson's forces captured St. Mark's on April 7, 1818 and Pensacola on May 24, 1818. James Monroe's Secretary of State John Quincy Adams defined the American position on this issue. Adams accused Spain of breaking Pinckney's Treaty by failing to control the Seminoles. Faced with the prospect of losing control, Spain formally ceded all of its Florida territory to the U.S. under the Adams-Onís Treaty in 1819 (ratified in 1821) in exchange for the U.S. ceding its claims on Texas and the U.S. paying any claims its citizens might have against Spain up to $5,000,000.

In 1822, the U.S. Congress organized the Florida Territory, and in 1845, Florida was admitted as the 27th state.

References

1. ^ The East Florida Society of London, Florida Historical Quarterly, Vol. LIV, No. 4, April 1976
2. ^ Ibid.

See also

• West Florida
• History of Florida
• Spanish colonization of the Americas

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