The Real Deal New York

A new golden age of east end living?

Gurney’s Resorts expands in Montauk, connecting vacationers in the Hamptons and Newport, Rhode Island
By Pia Catton | June 11, 2018 01:00PM

Gurney’s Montauk Resort & Seawater Spa

From a troubled beachfront timeshare to a resort empire linking Montauk to Newport, Rhode Island, Gurney’s has come a long, long way.

Since George Filopoulos of Metrovest Equities and Lloyd Goldman of BLDG Management bought Gurney’s Inn for $35 million in 2013, they have been gradually expanding the brand. Their latest move was the acquisition this May of the Montauk Yacht Club Resort & Marina, now known as Gurney’s Montauk Yacht Club & Resort, which has 107 rooms and a 232-slip marina.

Montauk Yacht Club Resort & Marina, which Gurney’s said has the largest marina in the Hamptons, is the company’s third resort property. The company’s first property, now dubbed Gurney’s Montauk Resort & Seawater Spa, has 146 guest accommodations along a 2,000-foot private beach, plus the 26 homes known as the Residences at Gurney’s.

In 2017, the developers ventured across Long Island Sound to add Gurney’s Newport Resort & Marina — formerly the Hyatt Regency Newport — to their stable of properties. That resort sits on a small island in Narragansett Bay.

With Newport about 30 nautical miles from Montauk, the team behind Gurney’s hopes to enable a new “golden age” of East End living: Take a helicopter from Manhattan to Montauk for dinner, stay the night and sail to Newport for brunch — all within the same resort brand.

The newly acquired yacht club in Montauk, which is about a 15-minute drive from Gurney’s first resort, sits on 35 acres and features three swimming pools. It was previously owned by Andrew Farkas’ Island Capital and Island Global Yachting. Both parties declined to comment on the sale price of the property.

The guest rooms and several areas of the yacht club got a $4 million refresh last year. And this fall, the owners plan on kicking off $13 million of work that will include relocating and upgrading the lobby, landscaping and site work, amenities at the family pool, a redecorated banquet room and new guest-room bathrooms.

LDV Hospitality is running food and beverage for Gurney’s, which includes the Hamptons extension of Manhattan restaurant brand Scarpetta. Guests at the new resort will also be treated to the same level of fitness and wellness partners as at Gurney’s Montauk, which offers yoga and barre classes, personal training, and an official spinning facility.

The marina at the yacht club can accommodate vessels up to 220 feet, which allows the brand to reach an additional population of travelers, Filopoulos said. They hope to attract incoming boaters and, with any luck, those who drop anchor from a mega-yacht will also decide to drop their bags on land for a stay, the owners said.

“I have been out there for many years and have felt there was real potential,” Filopoulos said. “If you have a marina that is busy and is providing luxury resort services, that will make the marina more desirable. We are excited to bring these types of guests.”

The connection to Newport adds another gateway: “We found last year we had Gurney’s guests who were going to Newport,” Filopoulos said. Through a partnership with the aviation service Blade, Gurney’s offers weekly flights from Manhattan to both the Hamptons and Newport.

Gurney’s takes a gamble

To get Gurney’s Montauk Resort & Seawater Spa to where it is today, Filopoulos and Goldman had to buy out approximately 2,000 timeshare participants between 2013 and 2018. In May 2016, the developers acquired the 20 homes of the adjacent Panoramic View property, which was sitting in government foreclosure. They’ve since put in $20 million in renovations to create the Residences at Gurney’s.

“We gravitate to these hairy deals,” said Filopoulos. “Gurney’s was a complex, failed timeshare. We sunk our teeth into it.”

The complexity was worth it, he said, because of scarcity. Gurney’s is the only four-season resort in Montauk, the company said, as well the only location for beach-front dining in the Hamptons. There are five eating and drinking locations, and there is an indoor seawater pool that draws from the ocean, the only one of its kind in North America, according to Gurney’s. To re-create the same property today would be nearly impossible, given the area’s strict permitting restrictions, the developers said.

“We appreciated the scarcity and the barriers to entry,” said Filopoulos. “Those were the two most important things to us as an investment.”

Finding hotel investment opportunities in Montauk is no easy feat, brokers said, because there are so few large-scale properties.

One of the few available hospitality investments, the 26-room Ocean Surf Resort, has seen active interest from national hotel chains and small-business owners alike, said Brown Harris Stevens’ Jose Dos Santos, the agent for the resort. The hotel has 160 feet of water frontage, and there is potential to turn the property back into co-ops, which was the original use and what the property is zoned for. The possibility of expansion is appealing to potential buyers.

“I’ve had a lot of interest and offers,” said Dos Santos. But pricing appears to be an issue: The owners initially dropped the list price from $25 million to $22 million after six months on the market, then decided to return to the original price.

Investment opportunities are indeed scarce for hotels in Montauk, agreed Corcoran’s Gary DePersia, who didn’t work with Gurney’s on the deals. He said he recently had a client looking to invest in a 50-room hotel, but such projects are few and far between.

Gurney’s Newport Resort & Marina in Newport, Rhode Island

And any potential projects may need extensive renovation, as Gurney’s has done with the Residences at Gurney’s.

“It’s much more upscale now. It doesn’t feel like you are going to the ‘Dirty Dancing’ hotel anymore,” DePersia said of Gurney’s. “Now you feel that you are going to something much more ‘today.’”

So far, so good

In 2013, when Filopoulos and Goldman took over Gurney’s, the hotel’s year-round occupancy rate was 38 percent, with an average room rate of $190. Now, the occupancy rate is 70 percent, with an average rate of $720, Filopoulos said.

Key to that increase has been year-round group travel from three types of business: technology, finance and fashion, said Filopoulos. In March, the resort had planned to close for several weeks, but due to the high level of group business, it could only close for five days.

In addition, guests are staying longer. “We have seen over 100 reservations of two weeks or longer,” said Filopoulos, adding that some guests have booked multiple weekends, including every weekend in July and August. “It’s an alternative to renting a home out here for a month. It gives them flexibility,” he said.

Meanwhile, the Residences at Gurney’s are finding buyers. The property’s 26 oceanfront homes range in price from $2.3 million for a one-bedroom (1,200 square feet) to $8.4 million for a five-bedroom (4,200 square feet). Taxes and maintenance add about $1,000 a month for a one-bedroom.

Six one-bedrooms located in one gut-renovated Point of View building at the Residences came on the market in late November. Four have already been purchased, according to exclusive broker Chris Coleman of Saunders & Associates (who grew up going to Gurney’s when it was a timeshare resort).

When Point of View units are not in use, they can be rented via Gurney’s income rental pool. The hotel handles the rentals, which go for between $2,500 and $2,800 a night, and the owner gets a 60 percent cut of the rent. “That’s a compelling story for someone,” Coleman said.

Owners vary in intention, he said. Some plan to balance their personal use with rentals. Some invested as rental property.

Although many buyers come from the tri-state area, one California family purchased two units. A
couple who already has an Amagansett home, though not on the water, decided to buy in. “They wanted to be on the ocean,” said Coleman.

The two other buildings at the Residences, known as Salt Sea and Hilltop, include 10 units each; only four remain on the market. These can rented for a minimum of 30 days, but that was less of a selling point, Coleman observed. “Those owners don’t seem to like to rent.”

Filopoulos describes the larger-home buyers as predominately empty nesters who enjoy the service of maintenance, housekeeping and amenities. (Other developers also say the over-55 set is a strong market; see TRD’s story on page 54.)

Among the challenges with making all this happen is finding employees who can afford to live and work at an East End location miles from affordable housing. To address that, Gurney’s has an extensive employee housing program that includes four hotels accommodating about 200, with another 70 beds on-site for employees.

“It’s a large human resources effort,” Filopoulos said. “The recruiting process is something we spend an enormous amount of time on.”

Looking to the future, Filopoulos knows that with a group of unique properties, the path to success needs careful, serious attention. And Gurney’s future may not follow the path of other destination companies.

“The brand is growing at a good pace. With the location and scarcity, it is not going to mirror what other brands have done.”