Time’s Up for Gurney's Timeshare Owners

Gurney’s buyout final at contentious meeting
Timeshare owners filed into the great hall at Gurney's Resort in Montauk to hear details about a proposed buyout last Thursday. Jamie Buffalino

The owners of Gurney’s Montauk Resort and Seawater Spa last Thursday approved a plan to buy out the inn’s timeshare owners and take full control of the property. During a shareholders meeting at Gurney’s that was depicted as contentious by those in attendance, George Filopoulos, the head of 290 Old Montauk Highway Associates, the company that purchased the oceanfront resort in 2013 and holds the majority of its shares, presented a plan that officially merges Gurney’s with his company.

Mr. Filopoulos, the president of Metrovest Equities in Manhattan, a real estate development firm, described the meeting as merely a procedural event, since it followed a decision earlier last month by Gurney’s board of directors to proceed with the merger and the buyout. 

According to documents sent to timeshare owners, Mr. Filopoulos’s company had received an appraisal from CBRE, a commercial real estate services firm, in February that valued the 11-acre property at $84 million. Using that figure to calculate payouts to shareholders, the company determined that for every 100 shares, which amount to a week’s stay at the property, the shareholder would receive $11,881. 

Pat Boffa, who represents the timeshare owners on the Gurney’s board, deemed the deal a victory. “I’m very happy with the money that we got,” she said. “The majority of people were quite happy; they were thanking me.” 

Mike Azzara, a one-week shareholder, echoed Ms. Boffa’s assessment. “The business was headed to liquidation,” he said, referring to the years when Gurney’s was operated by the family of Nick Monte, the founder of the resort. Prior to Gurney’s sale to Mr. Filopoulos’s company, the resort was plagued by high maintenance costs and special assessment fees, which led to a shareholder lawsuit against management. At the time, many owners decided to give up their units, leaving those who remained burdened with an ever-burgeoning share of the upkeep. 

“It took intellect, vision, and cash to turn it around,” said Mr. Azzara.

The shareholders who were adamantly opposed to the buyout included those who have a history with the resort and want to maintain a connection to it at any cost. Patricia Frank, who received her two weeks of timeshares as a gift from her late husband, said she promised him before he died last year that she would fight to hang on to her shares. 

“He is not getting back my shares until I say so,” Ms. Frank said of Mr. Filopoulos. “As I told George at the end of the meeting, ‘I kind of like the way you are running the joint around here, and I am more than happy to stay on as your partner.’ ”

Lee Squitieri, a Manhattan lawyer and part-time Montauk resident, has filed a class-action suit on behalf of Alan Sparks, an Arizona resident who is a Gurney’s timeshare owner. The lawsuit asserts that the $84 million appraisal “preposterously undervalues” Gurney’s and therefore shortchanges the shareholders.

Mr. Squitieri also said he believes he has a legal path to undo the 2013 agreement that 290 Old Montauk Associates struck with shareholders after its purchase of Gurney’s; the deal provided incentives for owners to relinquish their shares. 

At the time, Mr. Filopoulos’s company gave timeshare owners the option to either sell their shares immediately and receive reductions in maintenance fees or hang on to their units until the end of 2017 and take a chance that the inn would then be resold at a profit. Eighty-seven percent of owners handed over their shares. 

Last week, it was the ones who refused that initial deal who were faced with the company’s final offer, though some intend to remain holdouts for as long as possible. 

“Under New York law there are still claims that can be asserted that can undo the merger,” Mr. Squitieri said. “Many shareholders want to do just that."