History of Diamondhead
HISTORY OF DIAMONDHEAD, MISSISSIPPI
(1969 – 2004)
By James Keating, MD
Hancock County, as well as most of the United States, enjoyed economic growth following World War II. There was pent-up consumer demand for affordable single-family houses. Subdivisions and resorts like Diamondhead were carved out of previously rural land into single land development real estate companies. The story of investor Malcolm McLean is vital to understanding the history of the creation and evolution of the city of Diamondhead from a retirement/resort village to a more traditional bedroom community. Indeed, Diamondhead did not exist before 1969. The ups and downs of the national economy had an adverse effect on the project during the late 1970’s and 1980’s. This history of Diamondhead will be presented in two parts. The first article will relate the early years from 1969–2004 before Hurricane Katrina. In a forthcoming issue, the history of Diamondhead from
2005–2020 will be presented.
Malcolm Purcell McLean (1913–2001) was a native of North Carolina who started the McLean Trucking Company with an old used truck given to him by his father for high school graduation. The company prospered over the years and McLean proved to be an astute businessman and a brilliant transport entrepreneur. In fact, McLean invented the modern intermodal shipping container during the 1950’s and refit freighter ships to carry the boxes or containers. Moreover, his steamship corporation, Sea Land Service Inc., became profitable steaming between New York and Europe. In 1969 Reynolds Tobacco Company bought Sea Land for $245 M in cash and stock; this transaction netted McLean $160 M personally. It was at that time McLean decided to invest some of his money into land development and building houses.
McLean formed the Diamondhead Corporation, which would invest in resort developments throughout the South from North Carolina to Texas. The first project was called Diamondhead because the land is the highest point of elevation on the Gulf Coast in Mississippi, named after the volcanic cone in Hawaii. Another older established resort, Pinehurst, was purchased in North Carolina. Furthermore, the Diamondhead Corporation would eventually invest in many other ventures: Lake Forest (Mobile), Falcon Head (Oklahoma), Lake Arrowhead (Atlanta), Newport (Houston), Mile High (El Paso), and Sandpiper Cove (Destin).
McLean purchased the forestland consisting of 5,700 acres in Hancock County from the Gex family for approximately $3M ($500/acre). Walter Gex, Sr. acquired the original Gex acreage in 1937 from the Gulf State Paper Co. and the Easy Open Bay Company. The original Spanish land grant was awarded to Noel Jourdan in the eighteenth century. Incidentally, the Jourdan River is named after him and Diamondhead land is adjacent to its Rotten Bayou tributary. The original Choctaw name of Banchawah means decayed stream (Rotten Bayou) presumed to be the consequence of abundant decomposed deer corpses dumped into Devil’s Elbow by the local Indian inhabitants. This was a result of the process of tanning the hides for clothing or trade.
Dan Smith was a salesman for the Diamondhead Corp. in 1971 who reports that McLean poured a lot of money into the project attracting a team of twenty salesmen from all over the country, offering potential compensation of $60,000 – $100,00 per year. Promotional items were offered to the public who would drive out to the work site such as a $15 gift, S & H Green Stamps, pots and pans, moon rocks, crockpots, and family portraits. There were 10,000 parcels available carved out of the original design/plan for the community of Diamondhead. A lot sold for three to ten thousand dollars depending on the location. A sale could be made for 10% down and a mortgage for a low interest rate of perhaps 4.0%.
By 1973, 3,700 lots had been sold and sixty houses had been built. In addition, a hundred condominiums were sold in the first year. These condos were furnished and were factory built. For example, they came with plumbing and electricity embedded in the separate units. They were transported by water to Rotten Bayou and then moved to the building sites similar in concept to the containers McLean used to move freight from trucks to ships.
The national economy tanked in the mid 1970’s affected by the 1973 stock market crash and the oil embargo. Specifically, housing and land sales dropped and by 1975 all the salesmen except Dan Smith were discharged. In addition, a new accounting rule from the FASB (Financial Accounting Standards Board) as mandated by HUD (Department of Housing and Urban Development). This rule adversely affected all land developers in the United States. For these reasons, banks became reluctant to lend money to customers. Interest rates soared. Art Buchwald quipped that 1980 would go down in history as the year when it was cheaper to borrow money from the Mafia than the local bank.
In spite of these challenges McLean built the promised infrastructure including streets, the Pines Golf Course, sewerage and water, country club, yacht club and marina, airport/runway, and more condominiums. By 1977, 361 condos units had been sold. McLean had committed an estimated sum of $25M to Diamondhead and he was unwilling to let the project fail as had so many other land development projects in the United States in that decade. By 1980, the population of Diamondhead was 1,011 residents.
Artis James was made President of the Diamondhead Corporation in 1979 at age thirty-two and became the indispensable man for the Purcell Company and McLean over the next forty years. James is an accountant by profession and navigated the various McLean enterprises through many changes. The I -10 Interstate Highway was completed in this time frame and most of the early residents came from New Orleans. The early village was essentially a resort/retirement community. The influx of employees from the Naval Oceanographic Office at the Stennis Space Center commenced the slow evolution Diamondhead. It evolved into a bedroom community of W-2 wage earners and commuters to New Orleans or the Michoud Assembly Plant in New Orleans East. Diamondhead Corporation was selling houses as well as lots during the 1980’s and created their own mortgage company.
In 1985, the Diamondhead Corporation organized a property owners association (POA). A homeowner-elected board of directors was elected to manage the amenities such as the golf course, country club, tennis courts, yacht club and airplane runway. In other words, there were now enough residents paying POA dues to finance this mission. McLean decided to change the name of the corporation from Diamondhead Corporation to Purcell Company, Inc. in 1985 that was purely cosmetic. The developer published the Diamondhead News and new developments like The Oaks, Highpoint Townhouses, and the Harbor Houses were built. The historian Louis Fuchs noted: “The POA struggled with imperfect records and management problems initially but eventually matured into an organization that could successfully guide the community.”
Of note is during the 1980’s Malcolm Purcell McLean decided to purchase United States Lines (USL) and commission Hyundai Ship Builders to construct a fleet of 4,400 TED (twenty-foot equivalent units) container ships. He negotiated an $800,000,000 loan from the X M Bank with a down payment of 10% financed by City Bank. The gigantic 1,000 feet long container ships that operated around-the-world service were fuel efficient and slow. Likewise, as was his custom with projects like Diamondhead, McLean overbuilt the container ship project. Simultaneously, every shipping company worldwide had expanded their fleets of similar container ships. As a consequence, the increased supply caused a decreased demand and the rates on the open market plunged creating a cash flow crisis for McLean. By 1982 McLean had made the Forbes 400 Richest Americans List with a net worth of $400M. Nevertheless, the banks pulled his loan and United States Lines went bankrupt in 1987. McLean had to file for Chapter 11 bankruptcy owing a debt of $1.3B.
Back at Diamondhead, in this era, a group of dedicated community activist businessmen and company officers were successfully managing the affairs of the community and the Purcell Corp. Vice President and Project Manager since 1969, Holcomb Hector was integrally involved in the growth and development of Diamondhead in all phases of its construction. He also directed the construction of over 1,000 houses in the community over the first 25 years. Attorney Peter Casano was President of the POA and rescued the sewerage and water infrastructure from the McLean bankruptcy, enabling the future creation of the Diamondhead Sewerage and Water District. Casano owned and operated various enterprises such as a motel, marina, restaurant, real estate, and other financial businesses. Paul Montjoy was an early project manager of Diamondhead in 1972. Montjoy became the POA Director in 1985. Later in life he served on the Board of the POA. The Purcell Corp was reorganized as a private company in 1992.
In the decade of the 1990’s, Diamondhead experienced a resurgence of its economy. The Mississippi Legislature passed the Mississippi Gaming Control Act in 1990 to boost the economy. This resulted in two dockside casinos opening in Hancock County: one in Bay St. Louis and one in Lakeshore. NASA expanded its mission testing new solid fuel rocket motors for the space shuttle in 1989. Many of its new workers found homes in Diamondhead. The population of Diamondhead increased from 2,661 in the year 1980 to 5,912 residents in the year 2000. Casinos employed thousands of people who wanted to live in communities like Diamondhead where the land was relatively inexpensive, and the parcels already had water and sewerage infrastructure.
The Purcell Co. decided to develop in this time frame an upscale subdivision called Glen Eagle located in the heart of the Diamondhead Resort. Glen Eagle consisted of 189 lots averaging 100-foot frontage in an area of gently rolling hills wrapped around the newly built Cardinal Golf Course. It had winding roads named after famous golf course resorts such as Turnberry, Crooked Stick, and Cherryhill.
Builders and carpenters moved to the coast from all over the country. A local realtor, Joe Floyd, reports that regular lots in Diamondhead were now selling for $6,995. From 1995-1997 Diamondhead was building 50-100 houses a year. The POA dues rose from $15 to $25 per month. An 1,800 square foot house might sell for $150,000. Lots were less expensive here than in any other development in the region. Houses were often sold on the open market in forty-five days or less.
By 1993, Malcolm McLean had bounced back, and he created the Trailor Bridge Shipping Company. The company designed and built ocean-going barges for containers that moved cargo from Florida to Puerto Rico and the Dominican Republic. McLean died of a heart attack in 2001. His son, Malcolm McLean Jr. took his place in the Purcell Corporation.
Dan Smith and Ginny Milan had acquired a Century 21 Realty franchise in 1985 and their business prospered in this time frame as well as Jon Ritten, owner of Coast Delta Realty. Purcell Company was able to maintain the price of parcels of land because until 2001 the compound was a closed market. A list of available lots was given every day to this cluster of realtors located near the entrance of Diamondhead. “For Sale” signs were not allowed by the covenants to give a desired look of stability to the town compared to typical resort communities.
By the beginning of the twenty first century, Diamondhead was becoming more of a bedroom or destination community for the aforementioned local workers looking for a place to live. These relative newcomers resented the increasing POA dues spent on costly golf course maintenance. Also, some residents wanted the village to incorporate to become a city. Indeed, “a 1994 incorporation petition failed, but the effort laid down the groundwork for the future.”
In conclusion, Malcolm Purcell McLean was the key investor that created the town of Diamondhead in 1969. The land development real estate company, the Diamondhead Corporation (aka Purcell Co.), was vital for the success of the community over the last five decades. Competent business management of this bold project, large in scope and foresight, characterized the leadership of the corporation from 1969 – 2004. The project took twenty years to really flourish. A welcome economic boom did occur after 1990 stimulated by the advent of the gaming industry on the Gulf Coast and the increased workforce employed by the Stennis Space Center. A forthcoming article will track the rest of the history of this delightful city of Diamondhead commencing with Hurricane Katrina in August of 2005.
SOURCES:
“Diamondhead, Mississippi.” Wikipedia https://en.wikipedia.org Accessed 15 Nov 2019.
Ellis, Dan. Diamondhead Jubilee: Silver Anniversary Commemorative History.
Privately published by the author. 1995, Vertical File, Hancock County
Historical Society.
Fuchs, Louis. “The Formation of the City of Diamondhead.” The Historian of Hancock County, Mar., 2013.
James, Artis. Personal Interview. November 11, 2019.
“Malcolm McLean.” Wikipedia. https://en.wikipedia.org Accessed 15 Nov 2019.
Saxton, Wolfgang. “M.P. McLean, 87, Container Shipping Pioneer.”
The New York Times. May 29,2001 (Section C, P. 13).
Smith, Dan. Personal interview. November 8, 2019.
Scarff, Robert. Louisiana’s Loss, Mississippi’s Gain. Lawrenceville, VA: Brunswick Publishing Co.,1999.
HISTORY OF DIAMONDHEAD, MISSISSIPPI
(2005—2020)
By James Keating, MD
The second part of the history of Diamondhead is a compelling story about a young community that endured a natural disaster followed by the effects on its local economy of a catastrophic national financial crash. In spite of these challenges, the citizens of Diamondhead took bold action to solve their problems beginning with the incorporation of the community. Resourceful forward-thinking community activists recruited its most talented leaders to create a brand-new municipal government served by future mayors and a town council. This is their story.
Any period of Mississippi Gulf Coast history must include the occasional catastrophic hurricane, which always becomes a seminal event for that time frame. Katrina was a Class III monster hurricane hitting Hancock County on August 29, 2005. The initial insult was a thirty- foot tide that flooded (via the Jourdan River) low elevation property in the Kiln and Diamondhead. Isolated tornados and hurricane-force winds generated by the storm did much damage to these communities. Nevertheless, the twenty-seven-foot storm surge that followed the initial flooding was even more destructive in nature. Specifically, this surge almost completely leveled 250 houses in the South Side of Diamondhead mowing down everything in sight in a matter of minutes. Water is dense and heavy, and a cubic yard of H2O weighs 1,700 lbs. Furthermore, the surge of Katrina moved into the South Side of Diamondhead at a speed of 15 mph and destroyed everything in its path. On the North Side of Interstate 10 there was flood damage to 460 houses. Fifty-one people died in Hancock County alone.
Following Katrina there was no power in Diamondhead for 30 days and any banks or courthouses open for business. In Mississippi, one fourth of the labor force lost their jobs and regional unemployment was 24% for a while. Luckily, the 3,500 houses and condos not destroyed in the North Side of Diamondhead became a place of refuge for some of the 100,000 inhabitants of the Gulf Coast who were rendered homeless by Katrina.
Diamondhead became a focus of the ‘Mississippi Renaissance’ that would represent the amazing recovery in Hancock County after the storm. Indeed, in a few weeks, the population of Diamondhead swelled from 6,500 to 9,000 because there were no other communities in the immediate region on the coast that were habitable. Every new house sold in six months. In addition, the price of houses increased 25-50% compared to pre-Katrina. In the year following the storm, construction was down because citizens whose houses were damaged had not received their insurance money. The price of building materials skyrocketed. FEMA was paying $25/hour for labor that traditionally received $15/hour. Then, a boom in construction, particularly in Glen Eagle, occurred. Houses were built and priced at $300,000-$600,000 that were significantly different from the usual ‘single tract’ houses that had been built in Diamondhead since 1969. However, the boom post-Katrina in Diamondhead and in the rest of the United States evolved into an unsustainable housing bubble.
After 2006, elsewhere along the coast, big real estate developers were building fifty house projects in each in the six coastal counties. Banks gave mortgages to customers with poor credit ratings. These mortgages acquired the nickname ‘NINJA’ mortgage, a slang term that stood for “No Income, No Job, no Assets.” There was often no attempt by lenders to verify the applicant’s ability to repay such loans. Likewise, homeowners took advantage of the higher prices of real estate and had their property reappraised at a higher value so they could negotiate with the bank’s bigger equity loans. Wealthy and middle-class house-flippers with mid to good credit scores further exacerbated the speculative bubble in the real estate sector of the economy. As a result, the bubble eventually burst when US mortgage-backed securities laden with tranches of sub-prime mortgages collapsed in value and the Financial Crisis of 2007-2008 occurred.
In June of 2006, forward-thinking citizens of the community, many of whom were active in the Property Owners Association (POA), held a meeting at the Country Club to address the subject of Incorporation of Diamondhead to be a city. In fact, rumors had circulated in the community about the threat of annexation by Bay St. Louis. A casino was considered a real possibility in the South Side and the sales tax of such a business would be a real big cash cow for any city. Moreover, the prospect of the expiration of the covenants in 2020 meant the probable inability of the community to collect revenue through POA dues. Such a scenario represented a real potential financial train wreck for Diamondhead.
Community activists such as Chuck Ingraham, Tom McCory, Lloyd Ramirez, and John Yarlborough engaged in discussions with attorneys like Bragg Williams, city planners like Jerry Mills, city officials, and others with knowledge of incorporation and annexation issues.
In July 2006, the POA addressed the issue and appointed the Government Information Committee which was headed by John Yarlborough who was vice president of the POA. Ingraham remembers: “I was asked to serve on that committee that made the study of the various options. In December of 2006, we engaged Bridge and Watson of Oxford, urban planners to be our consultants. Chris Watson worked with us and suggested that we contact Jerry Mills to be our incorporation attorney. We brought him in January of 2007.”
Consequently, Incorporation was recommended to the POA, and an education campaign of the residents was conducted. As a result, a petition for incorporation was signed by 76% of the property owners and the petition was filed with the court in 2008. Nevertheless, some citizens challenged a lower court decision approving incorporation, but after a lengthy legal battle, the Mississippi State Supreme Court authorized or confirmed incorporation in 2012. Chuck Ingraham became the first mayor and the town council included Dianne Ackerman, Henry Holcolm, Ernie Knobloch, Ronald Lee Rech and Dalton Robinson. The city council developed a comprehensive financial plan, a zoning ordinance, a budget, police force, hired city employers and began collecting sales tax rebates and property taxes. The council also initiated action to purchase the city hall with a $1.1M municipal bond.
Colonel Charles Henry “Chuck” Ingraham is a retired US Marine logistics officer. He commanded support service units that gave him invaluable experience in areas of motor transport, engineering, supply, and construction. He served as the first mayor for eighteen months. Ingraham reports that there are four forms of municipal government: weak mayor, strong mayor, town council, and city manager. A town council form of municipal government was incorporated for the city of Diamondhead. The mayor is only the titular head and he is on the town council with only one vote.
Chris Watson, Bridge and Watson Urban Planners, Jerry Mills and Pyle, Mills, Dye and Pittman Attorneys-at-Law were commissioned to design the government of Diamondhead according to Municipal Government in Mississippi of which Mills is a contributor. The D’Iberville model was installed and their officers were helpful to the town planners. Ingraham now regrets that the incorporation plan did not annex adjacent acreage or land in Harrison County. If such land had been annexed, there would be good work sites in the town boundaries that would attract more commercial development. A casino would be a good business to have in Diamondhead for many reasons however a casino was not factored into any financial considerations for the incorporation of Diamondhead. Ingraham also thinks that if the amenities such as the golf courses, country club, yacht club, tennis courts, and swimming pools had been transferred to the city at its inception the current struggle between the POA and the city might have been avoided.
Thomas E. “Tommy” Shaffer IV was elected Mayor in 2013. He was re-elected in 2017.
A Great Recession occurred in the United States from 2008-2012. There was little or no building in Diamondhead in during that time. The price of houses plummeted. The Purcell Company like many real estate companies suffered difficult times due to lack of sales revenue. In 2016 the Purcell Company merged with the Larry Johnson Development Company in Houston. People’s Bank became the new owners of Glen Eagle that contained 56 lots for sale.
During the last three years, the economy of Diamondhead has seen a recurrence. The Alfonso Realty Company has sold many lots in Glen Eagle for a reduced price of approximately $25,000 to builders. Many small affordable houses have been built and sold in the compound. In short, these new, older downsizing homeowners continue to transform the character of Diamondhead from a resort/retirement community to a wage-earner bedroom community. For example, these customers do not want a big lot, or lawn, or a pool. These “Jewel Box” houses range from 1200-1400 square feet and cost around $250,000. The expression ‘jewel box house’ is a metaphor describing a fancy, small home with ‘gems’ inside like custom molding and marble or granite kitchen counter tops. Incidentally, 30% of these little houses are investment products that constitute affordable rental property. That is to say the lower income homeowners of Diamondhead do not see the value of spending $2.5M on the two golf courses and might reject any POA dues or voluntary parcel assessment. In spite of these challenges, the city of Diamondhead is considered by many observers to be the most attractive and beautiful community on the Mississippi Gulf Coast.
In conclusion, Diamondhead is a valuable case study in the economic history of the real estate sector in Hancock County. Indeed, the ups and downs of the national economy directly impacted the compound and its citizens over the years. Forward-thinking community activists like Chuck Ingraham and the many other men and women who volunteered their time and energy to design and execute the plan for a self-sustaining city are to be applauded. Also, the city owes a great debt of appreciation to the Purcell Company that built and fostered the whole project for decades.
Thus, after 50 years the dream project of investor Malcolm Purcell McLean to create a brand-new city in undeveloped forestland in Hancock County is a reality. An incorporated city of over 10,000 inhabitants flourishes today along the Jourdan River near the Bay of St. Louis. Although the storm surge of Katrina almost completely wiped out the entire neighborhood of the South Side, the North Side recovered and became a refuge for thousands of displaced citizens of the Gulf Coast, and Diamondhead grew substantially in size.
SOURCES:
Floyd, Joseph Edward. Personal Interview. November 4, 2019.
Fuchs, Louis. “The Formation of the City of Diamondhead.”
The Historian of Hancock County, Mar, 2013.
Ingraham, Charles Henry, Jr. Personal Interview. November 8, 2019.
Kieper, Margie. “Katrina’s Surge: Part 10.” Weather Underground Retrieved Jan 10, 2020.
Lewis, Michael. The Big Short. New York, N Y: W.W. Norton and Co., 2010.
Mills, Jerry L. Municipal Government in Mississippi, Mississippi State University: Center for Government and Community Development.
https://www.sos.ms.gov>content>pubs>10-2014-municipal government
Mills, Jerry L. “Petition for Incorporation City of Diamondhead, Mississippi.”
Chancery Court of Hancock County, Mississippi,
