Dan's Papers - May 23, 2008 - No Rooms at the Inn: Three SH Hotels are on the Block

A trio of Southampton hotels - The Atlantic, The Bentley and The Capri - which make up about 40% of the area's hotel stock, were put on the market last week. Combined, the hotels, which are all owned by Hamptons Resorts and Hospitality, offer visitors to the East End 49 suites and 84 rooms. The Capri also features the celebrity-studded Pink Elephant, a popular nightclub and restaurant during the summer season.

David Waksman, HRH's majority stakeholder for about 10 years, says he is open to any creative deal that could take the properties to the next level. The hotels could be sold individually, or as a package. And Waksman is even open to the idea of staying on as a partner, or simply as a consultant. "I just left it open to see what people were interested in doing," he said.

While it's just as likely the three properties could remain hotels, Waksman envisions a number of possibilities for them. The Capri, with the major draw of its on-site nightclub, could be turned into a private club, while the Bentley, which has 40 rooms, each 750 square feet, is ripe for condo conversion or senior living, he says. He's also considered merging with other local hotel owners, deals with developers interested in converting them into condo-hotels, even selling them to SUNY Stony Brook at Southampton for student housing, or cashing out with a major chain. "As a package, this is a great way for a high-level, branded hotel company to stake a claim in the Hamptons," he said.

Condo conversions are a necessity on the East End, he said, and the possibility of turning the hotels into condos will likely draw the attention of many developers. Judy Desidario, of Town and Country in East Hampton, says more and more people on the South Fork would prefer to live in condos rather than having to maintain a large home. She says it's much easier to pay one person to handle things such as landscaping and the pool. "He's captured a market. In Southampton, with Town zoning the way it is, you'll never get multi-unit facilities like that today," she said, adding, "Those properties haven't even reached half their potential. It's a unique situation to put up 40% of the market. It's something we've never seen before and we'll probably never see it again."

And Waksman, expecting to have the properties sell for a large sum, isn't even listing an asking price. He wants to see what he can get. "We've seen a lot of comparable hotel properties in the area asking for a significant price and others that were sold for a significant price," he said. "Hotel companies have significant capital for investment." He believes that though there is an economic downturn, the housing market on the East End is still strong, indicating that he should be able to easily sell his hotels at a high price.

The East Hampton Point resort is currently on the market for $55 million. The Montauk Yacht Club recently sold for $38 million while the Southampton Bays Motel sold for $5 million, converted to condos, then sold for $20 million within nine months, said Waksman. He said Rick Hoffman at Corcoran estimated a reasonable listing price of $30 million for the properties. Waksman originally paid $1 million for The Atlantic, $1.4 million for The Capri and $2 million for the Bentley. "When I first bought them 10 years ago, they all laughed at me," he said. "They said, 'No one will ever stay at a motel in the Hamptons.' I proved them very wrong, very quickly."

So far, he has received more than 100 calls regarding the properties, which are listed exclusively by Massey Knakal, a Manhattan-based real estate firm. Those interested have ranged from internationally known hotel companies to smaller, local ones to celebrities. He said he's also heard from Las Vegas hotel operators looking to create a clientele base on the East Coast.

Waksman says the first round of bidding will begin on June 5. If he receives a proposal that he likes, the capital restructure of the sale could be completed before the summer is over. With bookings lined up for the summer and as a sponsor of the Hampton Classic, he stresses that none of these or any other events would be affected.

He's also wary of negative media attention touting that the sale and possible conversion of his hotels will have a detrimental effect on the area's thriving tourist business, as visitors will find it difficult to find a place to stay. "I'm not sure it's really going to change that much," he said, adding that prior to the existence of hotels on the East End, visitors would simply stay with friends - very good friends.