The Real Deal New York

Hamptons eateries not immune

Even in tony enclaves, restaurateurs wary about taking new space

June 30, 2008
By Christopher Faherty

With several restaurants out of business on Long Island’s East End and a number of others for sale, it appears that even marketing to a wealthy Hamptons clientele can’t ward off the down economy — at least not entirely.

Local restaurant owners contacted by The Real Deal generally agreed that there is a wariness about taking on leases or purchasing restaurant spaces because of the economic uncertainty.

“There is a big joke here about ‘the two Ws’ that I really believe holds true,” said Eric Lemonides, the co-owner of Almond in Bridgehampton and the Almoncello in East Hampton, which opened in December. “Weather and Wall Street really do have an impact.”

Diners trekking out to the Hamptons this summer will see that several former prime eateries are now gone. For example, in the heart of Amagansett, the site of former Asian fusion restaurant Pacific East — a sprawling 7,000-square-foot space with two bars, an outdoor patio and a large parking lot — will be empty this season. It has been on the market for $6.5 million since September.

Also, Alison Becker has moved on from her namesake restaurant in Bridgehampton to run the eatery at the Maidstone Arms in East Hampton, leaving behind an empty 3,000-square-foot space on School Street.

Meanwhile, the nearly 5,000-square-foot club and restaurant in East Hampton at 44 Three Mile Harbor Road that seemingly changes names every year is leased for the season — Jeffrey Chodorow is operating a “shabby chic” version of his trendy Midtown steakhouse, the Kobe Club. The owner first tried to sell it in 2006, but took it off the market until February 2007, when it was listed at its current price of just under $5.5 million.

Note: Correction appended

In addition to those high-profile listings, there are a number of other restaurants currently in operation that have privately declared themselves for sale in the word-of-mouth market, according to insiders.

Lee Minetree of Corcoran, a top broker of restaurant space in the Hamptons, said the number of people inquiring about restaurants in the area has dipped by between 10 and 20 percent compared to last year. But he said despite the decrease in interest, the value of restaurant properties continues to rise because of the inherent barriers of entry to the industry.

With strict zoning laws and entrenched community politics, it is nearly impossible to open a restaurant in a space that wasn’t a restaurant before.

“Restaurants tend to always hold value because there isn’t a lot of inventory,” said Mark Smith, the co-owner of four restaurants, including East Hampton’s Nick & Toni’s and Rowdy Hall.

A broker for Prudential Douglas Elliman’s commercial services in the Hamptons, Robert Kohr, pointed out that while some restaurants have remained for a time on the open market, sellers have generally refused to lower asking prices. The listing price for Pacific East has held at $6.5 million since it went on the market in the fall.

Despite fears that a reeling economy and rising gas prices will keep beach-goers at home this summer, the optimists think the Hamptons will be impervious because of its traditionally wealthy clientele.

“I think the Hamptons customer is particularly resilient,” said Chodorow. “The reason I decided to open Kobe Club in the Hamptons is because I felt it was a great opportunity to further expose the brand to my ideal customer base.”

And for all the restaurants that are on the chopping block, others are opening, though many are being opened by already established Hamptons’ restaurateurs.

Some believe that factors such as a strong euro will bolster against any fallout in American clientele.

Jerry Della Femina, the owner of Della Femina in East Hampton, said he thinks the sluggish economy will benefit the restaurant business because people who would otherwise take trips to Europe will stay in the Hamptons.

It seems the area with the most turnover and restaurant activity this year is in Montauk. Likely the two largest restaurant properties for sale on the South Fork are the Inlet Seafood Restaurant and Rick’s Crabby Cowboy Café.

Situated on a seven-acre compound with views of Montauk Harbor, the Inlet Restaurant is on the market for $38.5 million. It is owned by a group of fishermen looking to cash out and retire.

The listing agent, Chris Coleman of Corcoran, said he thinks a single buyer interested in creating a private fishing club is a likely candidate.

Also on Montauk Harbor, Rick’s is an eatery and 22-slip marina with 14 guest houses that sits on roughly five acres of land and has just over seven acres of water rights. Prudential Douglas Elliman’s Kohr, who is representing the $9.9 million property, said it is a prime location for a yacht club.

Montauk is also home to two new restaurants this season. They are the Surf Lodge — opened by New York City club owner Steven Kamali — and the Second House Tavern. Both replace existing restaurants/inns.

Of roughly a dozen new restaurants that have popped up this season in the Hamptons, a majority have either been given facelifts under the same ownership or were opened by established local restaurateurs, which some say is a reflection of outsiders’ fears of the dipping market.

Late last month, Ed “Jean-Luc” Kleefield, the managing partner of four Hamptons restaurants, was slated to open the Grappa Wine Bar on Main Street in Sag Harbor. It will replace his New Orleans-themed restaurant and bar Mumbo Gumbo following a complete renovation.

Still, even a down market doesn’t always shape the decision-making of the extremely wealthy, brokers said.

According to one broker, the owner of the NFL’s Cleveland Browns franchise, Randy Lerner, who owns a number of properties in Amagansett, recently bought the Mill Garth Inn as well as the town’s landmark tavern, Gordon’s Restaurant, which is slated to reopen in September.

Comments are closed.