The 30-room Oceanside Beach Resort in Montauk has been sold to an East End developer for $10 million.
Longtime owner Ken Walles, president of the Long Island Hospitality and Leisure Association, closed Monday on the sale of the property to Montauk developer and property owner Jon Krasner.
Walles said the deal was in the works for more than a year.
“My intent was never to sell,” said Walles, former vice president and general manager of the 1,700-room Hotel Pennsylvania in Manhattan. He said he decided to sell after receiving an offer facilitated by his broker. Had he kept the property, Walles said he would have had to spend “another half a million” on renovations.
He said he bought the motel 18 years ago for $1.4 million.
Krasner, the new owner, who also owns Montauk restaurants Shagwong and The Saltbox, said he and his partners in the deal plan to upgrade the property. It will remain open during renovations and be renamed this spring, he said.
Krasner declined to disclose the partners’ names.
“We are not looking to be a party hotel,” he said. “We are looking to be a family hotel that welcomes everybody, where you can get a great piece of the Montauk vibe, but also have a great and relaxing weekend.”
The property, at 626 Montauk Hwy., consists of two two-story buildings and one single-story building. The beachfront establishment, built in the 1950s, sits adjacent to a nature preserve and is across the street from the Second House Museum, the oldest structure in Montauk.
The sale falls into a larger pattern of the upscaling of Montauk, said broker Jack Botero, who represented Walles in the deal. People are looking for a “much more polished product,” he said.
“This deal is going to set a higher bar in real estate out in Montauk following what I perceive to be a change in the demographics out here,” said Botero, principal at Montauk-based BlackBrick LLC.
Over the past five years, Walles said nightly room rates at the hotel have “jumped dramatically,” averaging about $400 a night during the summer season.
Montauk has seen several lodgings and restaurants change hands or hit the market in recent years. In 2013, George Filopoulous bought the 90-year-old Gurney’s Inn for $40 million. In 2014, billionaire Marc Rowan, co-founder of private equity firm Apollo Global Management, purchased both Ciao by the Beach and the family-owned Duryea’s for $6.2 million. In May, the 477-seat Gosman’s Dock restaurant and 14 acres of additional developed and vacant land was placed on the market for $52.5 million.
While Walles has “mixed feelings” about the sale, he plans to use the proceeds to purchase other hotel properties. “I’m using this as a springboard to do what I want to do,” he said.