In 1903 the Palacios townsite company arranged with the Southern Pacific Railroad to extend its line to the new city. The first train arrived on June 29, bringing prospective settlers from Midwestern states.
The company began construction of a pavilion on the South Bay in June 1904. Designed by Victoria Architect Jules Leffland, it was built on a pier extending 400 feet into the bay. Called the Pleasure Pavilion, it consisted of a central round two-story open-air pavilion with boat docks and bathers' dressing rooms extending along the pier. It quickly became the social center of the town, offering such activities as swimming, boating, dancing, skating, and basketball games.
The Pleasure Pavilion sustained hurricane damage in 1915, 1919, and 1934. Under the direction of a local seawall commission and with funding from the federal public works administration, it was razed in 1935 and replaced with a new pavilion, called the roundhouse. The roundhouse pavilion continued to be the focal point of community activities, especially during the war year of the 1940's and the early 1950's. It was destroyed by hurricane Carla in 1961, and eventually the city erected a smaller open-air pavilion in its place.