Smiling All the Way to the Bank
Last year, Ken Walles said a broker asked him if he would be interested in selling his Montauk motel, the Oceanside Resort. It was not on the market, but the broker wanted to know what the price would have to be for him to sell. Ten million dollars, Mr. Walles told him. A week later, the broker had a buyer.
The deal took over a year to close, but on Monday, Mr. Walles sold the 30-room property at 626 Montauk Highway, the first motel as you head into downtown Montauk from the west. Jon Krasner, a developer who is also an owner in the Shagwong and Saltbox restaurants, purchased it with partners for Mr. Walles’s magic number, $10 million.
“It’s bittersweet,” said Mr. Walles, who has been in the hospitality industry for 40 years and owned the Oceanside for 18. “It’s something you don’t want to do, but when you have all this money flying around, how long are you going to hold out?”
Mr. Krasner said he and his partners, whom he declined to name, are planning to reopen soon and are “upgrading the hotel into a family-friendly destination that takes advantage of its beautiful surroundings and what we believe to be one of the most impressive semi-private beaches in Montauk,” he said. The town’s Kirk Park Beach is just over the dune. “We want to be a hotel for everybody,” he said. “We want to be a very positive addition to the Montauk community.”
Jack Botero, who brokered the deal, the principal of the real estate investment firm BlackBrick L.L.C., said he is seeing a “tectonic shift in the type of investor that is coming to take a look at Montauk.” Today’s investors are people who have fallen in love with the area and are not happy with the party season. They want to raise the bar and provide additional services that “are more welcoming to a burgeoning demographic of affluence that has been bubbling at the border for a long time,” he said. “They want to invest their hard-earned monies here, and I don’t see that changing.”
While Mr. Walles had not planned to sell, he said, it was only a matter of time with “the way things were going on out here, the various developers and this new money coming into Montauk.”
“That was the eventuality. If I had an additional half a million to complete the renovation on the exterior, then maybe not,” he said. He said he had done extensive renovations over the years on the three buildings from operating revenues, but had not been able to complete them.
Mr. Walles bought the motel, built in the 1950s, for $1.4 million. It was then a seasonal motel, but he made the decision to keep it open year round, even as a sign that said, “Last one out, turn off the lights,” used to go up across the street around Labor Day. “If you have a property, you’re supposed to be opened all the time,” he said. He started putting holiday lights up to ensure visitors knew he was open for business, and once received a legal letter from town officials reprimanding him for putting them up too early in the year.
But it was the smiley face on the east-facing exterior wall that landed him in court. The motel had always been yellow, and when he was having the exterior painted one year, he decided to add the big smiley face as a joke. Initially, only the locals seemed to notice, he said. “It’s funny. It’s happy. It’s Montauk. I was forced to leave it by popular demand,” he said. “You’ve got to keep Montauk fun.”
Later, when he had two smaller ones painted, he was hit with town code violations. The case was eventually tossed, and the smiley faces remain. He does not know what will become of them under the new ownership.
Mr. Walles plans to remain in Montauk, where he bought a house three years ago. In the spring, he began a two-year term as the president of the Long Island Hospitality and Leisure Association, and while he will focus on that, he also plans to travel.