The Hamptons summer season is officially underway, and this year’s East End pleasure seekers will soon become acquainted with the new hotspots born during the off season — from upscale apparel pop-up shops to new restaurants to trendy hotels and hangouts.
While attention directed at Hamptons’ real estate typically focuses on the glamorous properties changing hands, this month The Real Deal broke down the commercial deals that took place while most of the industry was bundled up in the city.
Hotel happenings
The Hamptons haven’t seen a new construction hotel in decades because of zoning restrictions that limit the number of rooms and keep buildings under two stories.
However, several older hotels have traded hands and are undergoing renovations.
Not surprisingly many of those renovations have been in Montauk, which has morphed into one of the East End’s trendiest destination for the New York City hipster crowd — and real estate entrepreneurs — in the last few years. Indeed, investors like Bowery Hotel owner Sean MacPherson and boutique hotel firm King & Grove (newly rebranded as Chelsea Hotels) have all opened see-and-be-seen inns there in recent years with a bohemian chic vibe.
“Montauk’s surf scene and ‘un-Hampton’ attitude has made it a destination for investors from Manhattan’s financial sector and for restaurateurs,” said Robert Kohr, a Douglas Elliman commercial broker based in the firm’s East Hampton office.
Kohr noted that old-time hotel and motel owners have been cashing out, capitalizing on the millions they can make by selling to New York City-based investors looking to come up with the next hot boutique venue.
“They are buying these places that have been around for decades, taking them upscale and making them appeal to younger clientele from Manhattan,” Kohr said.
According to Kohr, Montauk room rates have increased astronomically over the last five years, to roughly $300-to-$1,000 a night, from $100-to-$300 a night. The highest rates, however, are coming from only one or two large hotels, including real estate mogul Andrew Farkas’ Montauk Yacht Club, where a 2009 renovation pushed room rates as high as $980 a night.
And the redevelopments are not slowing down.
For instance, the iconic East Deck Motel sold in October for approximately $15 million. Since then, few details regarding the deal — not even the identity of the buyer — have emerged. What is known is that the hotel is being taken high-end by its new management, with a possible rebranding as a private surf club in the works. There is no word yet on exactly when it will reopen.
Initially, there were reports that the buyer of the 30-room motel, which dates back to the 1950s and is adjacent to the Ditch Plains beach, was Vitaminwater billionaire Mike Repole. But representatives for the buyer, ED40 LLC, denied that Repole is the new owner.
Among those hotel plans with more clarity, the former Gurney’s Inn is newly upgraded this season and reopened on Memorial Day weekend as Gurney’s Montauk Resort & Seawater Spa.
Last summer, the resort, which dates back as far as the 1920s and most recently operated as a timeshare, was purchased for $25 million by New Jersey developer and president of Metrovest Equities, George Filopoulos. Filopoulos quickly brought on Jennifer Oz LeRoy, of Russian Tea Room fame, to open the Seawater Grill at Gurney’s Montauk, with chef Seth Levine, and began renovations. (The hotel’s previous restaurant, which was on the beach, was destroyed during Hurricane Sandy.)
Filopoulos renovated 38 of the resort’s 109 guest rooms, which range in price from about $300 a night for a studio to $950 a night for a private cottage, in time for this season, and plans to continue upgrades until he sells the property. At the time of the purchase, Filopoulos said he wanted to sell in 2018.
The renovation frenzy in Montauk reflects earlier moves in other parts of the Hamptons, albeit on a more opulent (and less secretive) level.
Early in 2013, for example, the luxurious 22-room Topping Rose House opened in Bridgehampton after a $12 million renovation, with room rates ranging from about $950 to $3,000 per night. Backed by investors like Bill Campbell, a senior adviser to JPMorgan Chase CEO Jamie Dimon, former Cartier head Simon Critchell, and celebrity chef Tom Colicchio, who runs the hotel’s restaurant, the spot is expected to be a big draw again this season.
Few other East End hotel deals closed in the last year. But several properties recently hit the market, so there are some potential deals being primed in the pipeline.
For example, TRD reported in December that a portfolio of three Southampton hotels — the 32-room Capri Hotel, the 62-room Atlantic Hotel and the 40-room Bentley Hotel — hit the market with hopes of fetching as much as $20 million.
A partnership between hotel investor Steven Kamali, the former owner of Montauk’s trendy Surf Lodge, plus David Edelstein and Jackie Mansfield, the owners of the W South Beach, put the trio of hotels on the market with the commercial brokerage HFF.
But the sellers are still hunting for a buyer.
Restaurant debuts
In the Hamptons, restaurateurs and hoteliers, of course, often wear the same hat — or at the very least operate together — like at the Topping Rose, where Colicchio is an investment partner, and Gurney’s, where Filopoulos opened the Seawater Grill with LeRoy.
But this season, small stand-alone restaurants in Sag Harbor are also commanding the big rent premiums. On Main Street in Sag Harbor, they are going for about $60 a square foot, compared to $40 to $50 a square foot last season, according to broker Hal Zwick of Town & Country’s East Hamptons office.
This spring, Zwick handled leasing for the owner of Madison and Main there. The 2,500-square-foot space went to Doppio East, an Italian restaurant, which has three other locations in New York City, Long Island and Connecticut. Zwick declined to reveal the exact rent.
Other new eateries to open this season include Westlake Fishhouse in Montauk, by chef Larry Kolar, and a second incarnation of Midtown Manhattan’s Harlow by restaurateur and former Nobu partner Richie Notar, in Sag Harbor.
Zwick said that the restaurant market remained strong over the last year, adding that “the economy has improved and people feel comfortable investing money again.”
Retail riches
Main Street in both East Hampton and Southampton remain the top shopping districts in the Hamptons, and both strips are seeing a slew of new shops.
Perhaps the most interesting and unusual East Hampton retail lease this season came from the high-tech spin studio Peloton, which uses video cameras to beam exercise instructors into the homes of customers following along on their own Peloton bikes.
The exercise studio took the 2,900-square-foot former Tiffany’s storefront on Main Street for the summer, beating out Apple and J. Crew in a bidding war, sources said. Previous reports stated that landlord David Fink was asking $425,000 per year, but a broker close to the deal said that the ask dropped to $375,000 — or roughly $130 a square foot. The source said that Fink did not use a broker.
But Zwick said that this season has been “incredibly strong.”
“We have retailers lining up to open here, lots of long-term leases and we are even seeing some bidding wars,” he said.
That was not the only tony retail to turn over in East Hampton this past off season.
The town saw cashmere retailer Christopher Fischer close shop. The boutique is being replaced by an outpost from designer Lisa Perry, who has a flagship store on Madison Avenue. Perry paid $270 a square foot for the 1,860-square-foot shop, according a broker familiar with the deal.
In addition, the 1,500-square-foot Juicy Couture on Newtown Lane in East Hampton has become a Kate Spade. However, since the two brands were until recently owned by the same umbrella company, the lease did not need to be renegotiated. Sources say the company is paying as little as $100 per square foot.
Just down the street, fashion designer Catherine Malandrino has been replaced by Zimmermann, a high-end swimwear boutique. Zwick negotiated the lease, which another source said went for approximately $160 per square foot.
Zwick also saw something new for the East Hampton retail market: Newtown Lane is pulling in prices nearly as high as Main Street. “Something new is happening in East Hampton,” Zwick said. “People are calling me, and the first thing they ask for is space on Newtown Lane.”
He added that the popularity of Newtown Lane is being driven by a cluster of hip designers, drawing the younger crowd off of Main Street.
Meanwhile, in Southampton — where asking rents average about $70 to $125 per square foot on Main Street — the Kardashians of reality TV fame signed a 600-foot lease for their designer clothing store Dash on Jobs Lane. Restaurateur and local landlord Irma Herzog, who runs the nearby American bistro Driver’s Seat, leased the space to sisters Khloé and Kourtney — much to the disdain of Southampton’s press-sensitive locals.
But a much larger and more significant deal went down in Southampton just off Main Street this spring, also without a broker. The gourmet market Citarella converted an 11,000-square-foot mini-mall into a high-end grocery. Citarella purchased the building from unnamed owners. The sale has not yet hit public records.
Meanwhile, in Water Mill, home-furnishing retailer West Elm is opening its first Hamptons outpost this month. The 7,120-square-foot store was Citarella’s former home in the Mill, previously known as the Water Mill Shoppes. Retail brokerage Ripco Real Estate handled the deal and has recently partnered with shopping center developer RD Management to manage the site.
Zwick added, however, that while a lot of great leases have been signed this year, few of them had “the ‘wow factor’” of previous years.