Gurney’s Resort and Spa and the Panoramic View Resort have sat side-by-side oceanfront in Montauk for more than a half a century. In December, the investors who own a majority interest in Gurney’s bought the Panoramic. The result could be the creation, under one corporate ownership, of one of the largest hotel and spa complexes on the East Coast.
The two entities have lots to offer each other. The Panoramic, originally with 118 units, each located in 1 of 10 cottages, was built in 1954 by John French, the millionaire who, years earlier, invented flash freezing fresh-caught fish. He saw it as a quiet hideaway for the summer resort set on the face of the cliff overlooking the Atlantic Ocean on the Old Montauk Highway. Its name, of course, is for its ocean views to the east, south and west, a panorama of sunrises and sunsets at certain times of the year, the cottages arranged on the property amidst beautiful landscaping, curving walkways and a lovely stroll down to its 900-foot-wide ocean beach.
In those early years, most people who came to the Panoramic did so by the week, and there were regulars who spent those peaceful vacation days out there socializing with one another.
Gurney’s Resort, which has a 1,000-foot-wide beach adjacent to the Panoramic, was built in 1926 by Maude Gurney as an inn. She was a strict teetotaler. There was no drinking allowed, and no smoking. There were church services on Sundays on the property.
If the Panoramic has remained pretty much as it did when built, Gurney’s grew and grew. Nick Monte, a young man from Brooklyn whose family was in the restaurant business, purchased it around 1956 and embarked upon a plan to expand and enlarge it to make it an attractive destination for the general tourist trade. He added convention halls, a larger second restaurant, more units and, around 1980, a beautiful Olympic-sized indoor seawater pool that put it up in a league with some of the great old spas of Europe. Where the Panoramic would shut down for the winter, Gurney’s, with its indoor spa, became a year-round destination.
You can see where these two operations together would be much more than just one and one are two. Although the Gurney’s ownership does not intend to merge the two resorts into one entity, at least for now, they provide what will now be close to 200 available rooms, some in the middle of the action and some off in the peaceful far reaches of the property. It remains to be seen how the Panoramic will have access to Gurney’s facilities, but the option is there.
Besides the long history of both of these places, both have been spectacularly in the news during the last five years—at Gurney’s with what had seemed a virtually impossible financial situation with its second-generation family ownership, and the Panoramic because of misdeeds by new owners of that place with a $100 million Ponzi scheme after buying the Panoramic from the second-generation family ownership in 2007.
That year, 2007, the two living sons of the late Earl French received an offer of $32 million for the property from a corporation run by Brian J. Callahan, a Wall Street money manager who was expanding into the resort business, and Callahan’s brother-in-law Adam Manson. The Frenchs took the offer.
2007 has that special ring to it. Immediately after that year, the entire country tanked into the Great Recession, and what might have been worth $32 million that year could have been worth half that in 2008. The Frenchs had the money. The new owners, Callahan and Manson, pressed ahead.
I recall Manson telling The Daily News that when Earl French bought the place in 1954, he had the “pick of the litter,” and that there was nothing in Montauk then, “No stores, no restaurants, nothing.”
Well, none of that was true. By 1954 Montauk had at least 20 motels, 10 restaurants, a great hotel on a hill, a downtown, a vibrant fishing village, a golf course, a polo field and a beach resort with cabanas, not to mention the old Gurney’s Inn next door. But hey, he was a Wall Street investor and it might have seemed correct to him. In any case, the new owners planned to re-invent the Panoramic as an upscale destination and sell off each unit as a condominium. Buyers would pay $3 million per unit. People winced. But if you did the math, that would give them about $180 million when it was done.
Callahan remained off-site as things proceeded. Manson remained on the site, supervising the transformation. He showed me around at that time, and he was a man with a dream, an eager salesman of the units, which were, one-by-one, making the transition to luxury.
It’s fair to say that the town gave Panoramic a hard time about this. You couldn’t build these structures on the cliff face today. But they pre-dated zoning and so were grandfathered in, with zero possibility of adding anything new. The town even insisted that the winding brick walkways remain exactly where they are, and, where in need of repair, proceed with the exact brick used. No porches could be built. Nothing new could go higher. No parking lot could change. No windows could be altered. Yet everything had to be sensationally better. The costs of it went up and up and up.
Turned out that Callahan and Manson borrowed much of the grand cost they’d paid from a bank. And to keep the project going, Callahan began to borrow from the pile of other people’s money he was supposed to be investing in various securities. As units were finished, they went up for sale. At $3 million, nobody was buying. Callahan found he needed more money than he’d thought, and so he began to pay out high profits to his initial investors, which brought new investors whose money he used to pay off the old. It was a Ponzi scheme.
And eventually the wheels fell off, as they always do. Both Manson and Callahan were arrested in 2013, were taken to trial in 2014, and eventually Callahan pleaded guilty to one count of securities fraud and one count of wire fraud, which could lead to a sentence of up to 30 years in prison, while Manson pleaded guilty to one count of wire fraud and received a sentence of up to five years in prison.
Through it all, the Panoramic continued to operate as if nothing had happened. But although the units were still up for sale, at $3 million not one single unit got sold. Many got rented by the weekend or week, however.
Government assessors estimated that the sale of the Panoramic could bring in between $58 million and $83 million, given all the improvements made. And now it has been sold, for $60 million, been sold to the people next door. I believe about $40 million may be used to pay back those who got scorched in the Ponzi scheme. I don’t know what happens to the rest, but maybe it just accounts for making the Panoramic a stunning resort facility.
So that’s the Panoramic story.
The story of Gurney’s Inn was also a difficult one, but there was nothing illegal about it. The completion of the spa addition in the early 1980s put a huge financial burden on the Monte family. For a while, Gurney’s Inn teetered near bankruptcy. And mortgage holders came calling. There was a time when a banker had to co-sign checks written by Mr. Monte. Then one of these mortgage holders made an effort to take Gurney’s away from the Monte family and the family was focused for a number of years on fighting this off. They made timeshares out of about 90 units. This doesn’t sound like a lot, but eventually there were some 5,000 new minority owners, each for a week, and though this raised about $25 million, which could be used to keep Gurney’s maintained for a while, it also turned out that the timeshare owners now owned the majority of the Inn. The Montes, in essence, now worked for them.
This was such a sad time. The timeshare owners had no idea how to run a resort and mostly could not agree among themselves. And the other group ran the place, but their heart no longer seemed in it. Gurney’s was now in a bad downward spiral. And there was no resolution in sight.
Into this picture came a man named George Filopoulos. A successful real estate man in the city, he came out to Montauk and fell in love with it. He bought a house in Lazy Point. Then he bought a house on the ocean near Gurney’s. Montauk was his retreat. One day, he and his wife were entertaining another Montauk couple in their home when the talk turned to Gurney’s. The friend had bought timeshares in the place. But now the place was locked in a death struggle that would only send it down into bankruptcy sooner or later. It was the friend who told Filopoulos that he was probably the only person on the planet who could save it.
But we just come out here for vacation, Filopoulos said.
Early on his career in real estate, Filopoulos had been given the job of taking over an 800-unit co-op in Jersey City that was falling into bankruptcy. This was not just any co-op. It had 400 families living in it. He approached the co-op owners with a choice of plans, one of which would allow them to become partners in the future of the operation if they so chose. As a result, he successfully repositioned the owners’ units. After that, he did the same thing on a 2 million square foot facility and what was once the largest medical center in the country.
Filopoulos, along with partner Lloyd Goldman, eventually decided to see what they could do with Gurney’s. Here they gave the time share people three slightly different options. They could choose to sell their shares, they could choose to use the unit at no cost for 5 years or they can remain shareholders for 5 years and receive a distribution at the end of 2017.
They hired a fine designer, Michael Kramer, and have refurbished more than half of the Gurney’s units so far and should complete the balance within two years. They have completely changed almost all the interiors and exteriors of the public spaces, including the restaurant, which is now a great glass jewel box where you can enjoy panoramic views of the ocean with year-round cuisine provided by Scarpetta Beach. They added a night spot, a café, a bakery, an outdoor area with a fire pit, and they’ve put beautiful strings of lights over these outdoor areas to give them a festive, romantic appearance into the night. They’ve also made a great bistro out of the beach café on the 1,000 feet of sand and they’ve modernized the spa and swimming pool and made the place first class. You remember the old. Now go see the new. Enjoy Gurney’s for dinner, for conferences and for the ocean swimming and great
And now comes the purchase of the Panoramic. In the last five or six years, much of Montauk has been transformed into an upscale resort. Now it will have a world class resort with a quarter-mile of oceanfront as its centerpiece.