The hopping Hamptons

A look at the real estate deals behind the East End’s newest hot spots

Jun.June 01, 2012 07:15 AM


Surf Lodge

When beachgoers and socialites head out to the Hamptons this season, they will be greeted by a collection of trendy new restaurants and hot spots. After several years of relative quiet, the East End has seen a flurry of commercial real estate activity in the last few months, with several prominent properties trading hands. As The Real Deal and others have reported, the deal-making has been hottest in Montauk, where three-decade-old venues are undergoing face-lifts and the much-hyped Surf Lodge is under new management.

A handful of new high-end retail stores have also opened recently, including a Haute Hippie clothing store in East Hampton and James B. Fairchild and Alice & Olivia boutiques in Southampton.

And while most major retail spaces in the East End villages are already full, properties of 1,200 square feet or less in the desirable town centers have seen the strongest demand, said Hal Zwick, a commercial broker at Town & Country Real Estate.

Zwick — who brokered the Alice & Olivia and Haute Hippie deals and is marketing the White’s Pharmacy space in East Hampton for $6.7 million — said retailers are particularly location conscious this year. Before the recession, he said, some retail chains would establish a Hamptons outpost simply for the sake of marketing and visibility. Now they’re concerned about finding the spaces that will give them the most bang for their buck.

“The retailers have a post-recession mentality,” Zwick said. “They’re looking for the best location to maximize foot traffic because, quite honestly, being at one end of the block instead of another can effect your customer count by 25 percent.”

This month, The Real Deal delved into the real estate deals behind the newest Hamptons eateries and nightspots — some of which have gotten a lot of public attention, while others have slipped under the radar.

Surf Lodge

183 South Edgemere Street (Montauk)


Michael Walrath
Tech entrepreneur and part-time Montauk resident Michael Walrath, previously a minority investor at the Surf Lodge, bought the trendy hotel, bar and restaurant outright in April.

The price for the 1.26-acre property was not disclosed, but a source familiar with the bidding said Walrath likely paid just under $3 million to buy up the remaining debt on the property.

The previous owners — hospitality consultant Steven Kamali, along with nightlife moguls Jamie Mulholland, Jayma Cardoso and Robert McKinley through an entity called Edgemere Montauk LLC — paid $4.41 million for the property in 2008, according to public records. (Cardoso is staying on to manage day-to-day operations.)

Walrath — who founded the online advertising company Right Media and sold it to Yahoo! for $680 million in 2007 — has been busy paying off fines from the town of East Hampton related to almost 700 code violations levied against the business last summer.

Last month, his firm, Montauk Properties LLC, agreed to pay $100,000 to settle 100 of the violations. The rest were dropped.

The Surf Lodge deal was handled without a broker, the East Hampton Star reported, with Montauk Properties taking over the previous owners’ legal burdens and responsibilities. Walrath did not return calls for comment.

Meanwhile, Walrath was also part of the investment group that bought the Montauk seafood restaurant Lenny’s on the Dock in January for $4.3 million.

Walrath and his business partner, chef James Tchinnis, plan to reopen it early this month as a 2,400-square-foot restaurant called Swallow East. The property, which is at 474 West Lake Drive, is just under an acre.

Judi Desiderio, president of Town & Country, the firm that handled the Lenny’s sale, said Walrath may be interested in picking up other Montauk properties.

“He’s hot for Montauk commercial real estate,” she said.

All eyes will be on Walrath this summer, especially at the Surf Lodge, which had previously been at odds with the community over the hundreds of see-and-be-seen partiers who flooded into the establishment every weekend night.

But Walrath has said its new incarnation will be more low-key. The Surf Lodge, which replaced the time-worn Lakeside Inn in 2008, represented a turning point in the hamlet, for better or worse, Desiderio said.

“They really turned a sleepy little Lakeside into a destination, and then that brought a lot more interest to the area,” she said. “Even though the people in Montauk may not be totally happy with it, I think if they spoke candidly, they’d say that the business that it brought into Montauk was well-received.”

Beaumarchais East Hampton

44 Three Mile Harbor Road (East Hampton)

The Meatpacking District brasserie, known for its party brunches, has opened an East End location in a space last occupied by high-end Chinese restaurant Philippe Chow.

Beaumarchais signed a five-year, $100,000-per-year lease on the space, which is located in a 4,965-square-foot building that also houses the nightclub SL East.


Frank Cilione
The entire building is currently listed for sale for $3.95 million with Marcus & Millichap’s Steven Siegel. The property is owned by Cilvan Realty LLC, an entity founded by Frank Cilione, a restaurateur who operates in the Hamptons and Florida.  In 2010, Cilione ousted the nightclub Lily Pond from the space now occupied by SL East, which has four years left on a five-year, $195,000-a-year lease.

Beaumarchais’s new home is a stable environment, Siegel said, unlike Hamptons party spots that have been plagued by neighbor complaints. It is in a commercial area, he noted, with a large parking lot (the better to avoid citations for illegal parking) and few homes nearby.

“Those two tenants are excited to be there,” Siegel said. “They’re going to be there for a long time, and the sellers are just looking to take advantage of a strong market right now.”

Andrra

39 Gann Road (East Hampton)

Andrra, a new Mediterranean restaurant, replaces the Boathouse, restaurateur Michael Gluckman’s seafood destination. But the space is still best known for its previous tenant, Bostwick’s Chowder House, which was there for 15 years before relocating in 2009.

The building is owned by the Mendelman family, who renovated the 2,500-square-foot restaurant space after Bostwick’s left. They expanded an outdoor deck, said Town & Country’s Zwick, who noted that the Andrra property includes “a whole boat yard.”

The Mendelmans are “a very nice family … they’ve owned [the building] for years,” he said, adding that they also own several other East End marinas, including Harbor, Halsey’s and Gardiner’s marinas.

This spring, the East Hampton Star reported, the family’s company, Seacoast Enterprises Associates, Inc., bought the Three Mile Harbor Boat Yard.

In 2010, after Bostwick’s moved out, Gluckman signed a 15-year lease to operate the Boathouse there. But this March, he sold the business to Sami Krasniqi — who, according to news reports, previously operated the restaurant Coco on East Hampton’s Main Street — along with Noto Krasniqi and Rich Silver for an undisclosed amount, with the new owners taking over the remainder of the lease.

The new restaurateurs have renovated the space again, Zwick said, installing a new bar and a gas fireplace.


Pop-up Whole Foods
Pop-Up

Whole Foods Market

Montauk Highway (Wainscott)

After becoming convinced that the East End market was right for a big-name grocery store, Gregg Saunders — vice president at the Manhattan-based real estate company Philips International — bought the former Plitt Ford dealership and set out to develop it.

“I bought the property knowing that I was going to put a Trader Joe’s or a Whole Foods there,” said Saunders, who has a house in Sagaponack.

The dealership closed in 2009, and Saunders bought the 1.9-acre property at a 2010 note-sale auction for $3.9 million.

Since then, he has secured the requisite East Hampton town approvals for a full-size grocery store — though the store that will open this summer is a small pop-up market in the existing 8,000-square-foot building. The project, Saunders said, is a test to see if a full-size store will work.

Patrick Smith, a principal at SRS Real Estate Partners, served as Whole Foods’ broker on the lease. He declined to comment, and Saunders would not say how much the chain was paying in rent.

“I will tell you this,” he said. “In downtown East Hampton, the rents start — start — at $100 a foot. I’m on the highway [so] I’m a little bit different. But rents in the town of East Hampton, for quality real estate, start at $100 a foot.”


The Montauk Beach House
The Montauk Beach House

55 South Elmwood Avenue

(Montauk)

The former Ronjo Motel, on downtown Montauk’s central plaza, sold in February to Sole East’s Chris Jones and his business partner Larry Siedlick.

The duo paid $4.21 million for the four-building, 11,650-square-foot Ronjo, which had been listed as high as $6 million. Atlantic Beach Realty’s Rick Solano, the seller’s agent, said his firm took over marketing in April 2011, and listed it for $5 million.

Jones and Siedlick bought the 33-room motel from Hoa Nga Tran, a Vietnamese immigrant who scooped it up in 1982 for about $1 million, Solano said.

In an interview, Jones said the new ownership is spending $2.3 million to renovate the property. Besides the motel, the finished property will have two pools, 120 cabana beds and a private beach club.

Though the Ronjo had a no-frills reputation, Solano said its location just two blocks from the beach was a major selling point — especially now that Montauk has reached a new level of popularity.

In the past, Montauk was known for “mom-and-pop people who have run businesses seasonally forever,” he said.  “Now a lot of people are coming in and gut-renovating places, trying to find value. And it’s working for them.”

Room rates at the Montauk Beach House, Jones said, will start in the $300 range for midweek nights, rising to $400 to $500 per night for peak weekends.

The property is part of a mini hotel empire that Jones has recently established in Montauk. He opened Sole East, a 60-unit “resort” in a landmark Tudor building near Montauk village, in 2006, and around the same time, the 26-room Sole East Beach motel.

The Montauk Beach House project, though, has recently hit a roadblock: a legal dispute over a 3,700-square-foot alley. The developers bought the alley — which is critical to the renovation plan and runs through the property — from the town of East Hampton for $35,000.

Some Democratic town board members have alleged that Republican town supervisor Bill Wilkinson sold the property, without an appraisal, for far less than its true value as a political favor to the developers.

The issue has triggered a lawsuit from a group of residents challenging the board’s approval of the project. The board later ruled that approval of a basement in one of the property’s buildings would require a separate public hearing, to be held this month.

The Montauk Beach House is scheduled to open on June 23, and Jones said he is confident about making that deadline, despite the recent controversy.

“We found ourselves in the middle of a political sort of mess there,” he said. “I’d be misleading if I said it hadn’t cost us a little time and money, but we’re staying focused on getting open.”

The process, Jones added, has been “like running a marathon with your legs tied together.”

Topping Rose House

Montauk Highway (Bridgehampton)

The 1842 building at the corner of Montauk Highway and the Bridgehampton–Sag Harbor Turnpike has been known, for much of its history, as the Bull’s Head Inn.


Tom Colicchio
But it’s now opening as the Topping Rose Inn, a joint hotel venture between business executives Bill Campbell and Simon Critchell and celebrity chef and restaurateur Tom Colicchio.

The first seven of the hotel’s planned 22 rooms will open this summer, along with the restaurant and a space for private entertaining. A spa and the remaining hotel rooms will follow later this year.

Campbell, the former chief executive of Philip Morris, reportedly paid $5 million for the site in 2006. He spent years securing town permits, and after Critchell joined him in 2010, the pair spent $12 million renovating the property.

Colicchio, who joined the venture last fall and whose management company will operate the property with the hotelier Jeff Morgan, has said the restaurant should open in late summer. Through a spokesperson, all four men declined to comment.

Salivar’s Restaurant & Bar

470 West Lake Drive (Montauk)

This 24-hour, dock-front eatery, a fixture in Montauk for a half-century, is a popular stop for early morning egg sandwiches. It’s also home to the head of a great white shark caught in 1964 by famed fisherman Frank Mundus (reportedly the inspiration for the character of Quint in the movie “Jaws”).

The property sold in November for $3.3 million to a married Manhattan couple — Jo-Ann and Brian Obergfell — who said they hope to maintain the restaurant’s colorful decor and unpretentious food while performing needed repairs and upgrades on the 3,649-square-foot building.

Brian Obergfell is a commercial real estate attorney with the firm Emmet, Marvin & Martin, while Jo-Ann also has real estate in her genes, her husband told The Real Deal. Her Swiss immigrant grandfather, Joseph Portman, built more than 1,000 rental units in Manhattan after World War I. In addition, she sold a large stake in 150 East 72nd Street, an apartment building, to the developer Harry Macklowe last year. (In total, Macklowe paid $70 million for the building, which he plans to convert to condos.)

The Obergfells bought Salivar’s from a relative of longtime owner Pete Chimpoukchis, who died in 2006. Town & Country’s Stacey Barnds brokered the deal.

By the time the Obergfells bought the property, it had been on the market for more than a year and the price had fallen substantially from its initial listing price of $7 million.

Brian Obergfell said his family is searching, carefully, for a tenant to operate the restaurant, likely beginning next year.

“We’ve had a lot of interest, but we still haven’t decided,” he said. Locals have fretted over the possibility that the new Salivar’s could feel uncomfortably trendy and hip, but Obergfell said they shouldn’t worry.

“It’s got taxidermied fish, actual fish hanging all over the place, pictures from the 1950s,” he said. “I’ve been going out there since I was a little boy, and I used to sit at that counter and eat doughnuts with my father. It’s a cool place, and it would be a shame to change it.”

The exception, he said, is the physical infrastructure: A new septic system is being installed, and work will begin on the building and a new dock after Labor Day.

Hamptons Players Club

103 Montauk Highway (East Hampton)

Restaurateur Frank Cilione (see Beaumarchais above) has a new venture this summer: a polo-themed restaurant with a 1,500-square-foot beer garden. It will replace Gluckman’s Beachhouse restaurant, which opened in the building last summer and closed a few months later.

Cilione, who did not return calls for comment, told the website HipHamptons.com that he and his partners had signed an 11-year lease on the property and brought in Hector Diaz, a chef from Cilione restaurants in Miami and Palm Beach, to create a modern American menu.

Bell & Anchor

3253 Noyac Road (Sag Harbor)

David Loewenberg and Sam McCleland, who are already partners in the Beacon restaurant in Sag Harbor, are taking over a restaurant space at the Mill Creek Marina that was formerly occupied by Oasis. Details on the broker and terms of the deal were not available.

Nammos Estiatorio

136 Main Street (Southampton)

Nello Summertimes, the former tenant here, opened in 2005 as the Hamptons outpost of a popular Madison Avenue restaurant. It quickly gained a reputation for its high prices — $17 for a plate of mixed berries and $40 appetizers. Nammos, its Greek and Mediterranean replacement, is more modest, if only by comparison. Owners include Tim Salouros and Thomas Makkos. Details of the deal were not available. Nammos was scheduled to open over Memorial Day weekend.


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